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Chinese state oil giants take petrol price battle to the pumps

Chinese state oil giants take petrol price battle to the pumps

BEIJING: Chinese state oil giants Sinopec and PetroChina are waging war at the nation’s gas pumps, slashing prices at unprecedented rates in an effort to reclaim sales lost to private local and foreign rivals in the $440 billion retail fuel market. The rare price war kicked off in late March as Sinopec (0386.HK) reported first quarter retail sales had slid to a three-year low. Spurred by a glut of fuel, Sinopec started offering hefty discounts in response to ad-hoc but frequent promotions by independent petrol station operators. PetroChina (0857.HK) swiftly joined in, triggering a ferocious battle against independents and international firms including Shell (RDSa.L) and BP (BP.L), said three state oil sources involved in retail fuel marketing.

The heavy discounting is now spreading from the most heavily oversupplied provinces in China’s north, squeezing fat retail profit margins in the world’s No. 2 fuel market. The battle is proving a boon for China’s drivers. In the gritty northern coal town of Luliang, taxi and delivery drivers were queued up at a Sinopec outlet after it slashed pump prices by 1.4 yuan ($0.21) per liter, or nearly a quarter, one recent weekend. “We all know Sinopec has higher gas quality but it was so expensive, so before I went to independent stations to fill my vehicle,” one driver surnamed Zhang told Reuters as he waited to gas up his dusty, gray 7-seat van. “Now I switch to Sinopec and will keep visiting here as long as Sinopec offers discounts like this.” Nearby gas stations run by PetroChina and local private operator Taihua each offered the same discount, promoting the bargain prices with eye-catching red banners, free car washes, and credits in pre-paid petrol cards. Sinopec spokesman Lu Dapeng said price cutting was “the most common approach in market competition”. He didn’t elaborate.