China raises oil prices 18%, buy Petrochina
China released news today that it planned on raising its nationalized gas prices by 18 percent, perfect news for only oil company struggling with maximizing profits due to these set prices: Petrochina. Petrochina is the world’s largest oil company, it’s a nationalized product of China and at its highs had a market value of nearly $1 Trillion. This thing is huge.
Petrochina hasn’t been able to capitalized yet on the high oil prices as mandates keep national gas prices low, Petrochina is essentially the arm of the government in the oil industry. The low gasoline prices kept the company from any real profitability, it had to explore areas where oil could be refined at prices 50% lower than what they are now. With all of the new options to make money in other oil wells, Petrochina stands to gain ground with higher prices.
Many of the wells that Petrochina owns aren’t profitable until a certain dollar figure. It had to lose money to subsidize the political gains of the Chinese government, who is its first important purchaser. As far as I am concerned, after this announcement Petrochina is worth at least 18% more.
Rate hikes in gasoline from a government such as the Chinese is surprising. While other Asian nations were lowering their subsidies and raising prices, the Chinese government stood by, unwilling to raise prices. Now that the floodgates have been opened, I think the People’s Republic of China will tap more into their ability to raise prices, cut costs and cut consumption. Petrochina is the big winner here.