Gas Station Sales Promotion Reduced Recently

Gas Station Sales Promotion Reduced Recently

With the decline of China’s automobile ownership growth and the rapid growth of new energy automobile sales volume, from the beginning of 2019, China’s demand for gasoline stayed relatively sluggish. Meanwhile, due to the economic structural transformation, the demand for diesel trended down, and the diesel/gasoline output ratio at refineries dropped sharply. As a consequence, the gasoline output in China kept going up, and China’s gasoline market suffered from serious oversupply. In May 2019, the gasoline inventory at state-owned refineries in most regions stayed at a high level, and in order to reduce the gasoline inventory pressure, many state-owned refineries started cutting their prices of gasoline, and the prices of gasoline at Shandong independent refineries also trended down. Accordingly, the average price of diesel exceeded the average price of gasoline from the middle of June for a long period.

According to SCI’s statistics, in 2019, the bottom of 92Ron gasoline price at state-owned refineries appeared on June 21. The price was RMB 6,364/mt, and the price spread between gasoline wholesale price and retail price that day was RMB 2,565/mt. The bottom of 92Ron gasoline price at independent refineries appeared on June 18. The price was RMB 5,862/mt, and the price spread between gasoline wholesale price and retail price that day was RMB 3,026/mt. Because of the huge price spread between gasoline wholesale price and retail price and the oversupply in the gasoline market, many gas stations started sales promotions. The mainstream price cut at gas stations was around RMB 1-1.5/L, and the price cut even reached RMB 2.3/L in a few regions. The competition among gas stations intensified dramatically.

However, from the middle of July, due to the intensive unit maintenance at refineries, the gasoline output declined to some extent. Meanwhile, with the rise of China’s gasoline export volume and the increase of gasoline demand during the summer vacation, the gasoline wholesale prices started rebounding from lows. The average price of 92Ron gasoline exceeded the average price of 0# diesel in the middle of August. Moreover, in July and August 2019, the international crude oil prices kept fluctuating, and China’s retail ceiling prices of gasoline and diesel experienced ups and downs. With the surge of gasoline wholesale prices, the price spread between gasoline wholesale prices and retail prices narrowed significantly. Up to September 5, the average price of 92Ron gasoline at state-owned refineries was RMB 7,100/mt, and the price spread between gasoline wholesale prices and retail prices was RMB 1,675/mt. The average price of 92Ron gasoline at Shandong independent refineries was RMB 6,660/mt, and the price spread between gasoline wholesale prices and retail prices was RMB 2,074/mt. Both the gasoline price spreads at state-owned refineries and Shandong independent refineries dropped sharply. With the approaching of Mid-Autumn Festival holiday and the National Day holiday, the gasoline demand is likely to grow, and as a consequence, the sales promotions at gas stations reduced significantly. The mainstream price cut at gas stations was only around RMB 0.3-1/L, and in a few regions, the price cut at gas stations could reach RMB 1.5/L.

In the future, with the support of the Mid-Autumn Festival holiday and the National Day holiday, the gasoline demand will grow, giving support to the gasoline wholesale prices. Therefore, SCI reckons that the wholesale prices of gasoline will increase further, and the increase may be around RMB 200-300/mt before the National Day holiday. However, the current international crude oil prices keep fluctuating, and the retail prices of refined oil in China is likely to stay largely stable. Therefore, the price spread between gasoline wholesale prices and retail prices will stay at a relatively low level, and the sales promotions at gas stations will be relatively weak.




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