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Sinopec under pressure from private competitors in retail market
Sinopec, the country's state-owned oil group, recently cut its processed oil retail price for the first time this year, a move that probably fired the first shot in reshaping the country's process oil retail market, which were previously firmly dominated by the state-owned oil giants
In mid November, just two days after National Development and Reform Commission, China's top economic planner, announced another increase in fuel prices in line with the country's new pricing system, Sinopec decided to cut the price of petrol and diesel at certain service stations in Beijing. Such moves were in response to strong competition pressure from private gas stations, which have witnessed a rapid expansion in the wake of the global financial crisis.
Over the past year, about 20,000 private gas stations have opened in regions that were dominated by Sinopec.
Sinopec's Counterblow
Li Yan, a wage-earner in Beijing, used to fuel at Duo Meiduo, a local private filling station as she thought the petrol quality there was as good as the Sinopec's. However, she recently decided to shift to Sinopec's service station for fueling, for the latter lowered No.93 petrol by 0.3 yuan per liter in the middle of November. After the price cut, the present price for No.93 petrol was even a little lower compared to the level before the NDRC announced another increase in fuel price on November 10.
A source from Beijing Branch of Sinopec Sales Company interpreted such move as the regional point-counter-point sale strategies. However, Sinopec's service stations in Shanghai, Chongqing, Changchun city also followed suit. In addition, PetroChina began to join in the same camp.
In the past, due to always considering PetroChina as its main rival, Sinopec didn't take the initiative to cut the retail price to compete with private filling stations. However, the situation changed this year.
Petroleum product sales for Sinopec in the first half of this year dropped 8 percent from a year earlier to 57 million tons, but its sales target for 2009 was 130 million tons. As a result, Sinopec faced huge sale pressure.
In addition, Sinopec's market share in the north, east and south of the country has registered a 10 percent drop from 60 percent to 50 percent. What's more important is that private gas stations witnessed a rapid development in the past year and their retail price was much lower compared with the two state-owned oil group.
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