Since November 1, 2007, when the National Development and Reform Commission increased refined oil prices by nearly 10% (500 yuan per ton), China's two leading oil companies, Sinopec and PetroChina, have been seeking government subsidies. It’s ironic that the most profitable companies in the country are forced to raise prices and then ask for financial support. Commentators have remarked, “There’s nothing more absurd than this.” To find another layer of irony, consider the fact that oil is both exported and imported. The two giants are eager to align with international standards—just look at Argentina’s example. On January 7, the Argentine government banned the export of refined oil to address domestic shortages and stabilize prices. Earlier last year, they raised the export tax on refined oil from 5% to 35%, and crude oil exports from 45% to 60%. With domestic crude oil priced around $42 a barrel, and gasoline prices kept low, local oil companies had no choice but to rely on exports to offset losses. While information about China’s export taxes is limited, it’s known that the crude oil export tax is only 5%. If domestic prices remain low, it makes sense for Chinese oil companies to prioritize exporting rather than meeting local demand. In the first half of last year, China exported 1.82 million tons of crude oil and 7.91 million tons of refined oil. The full-year figures are expected to be released soon. Meanwhile, during the second half, when the Pearl River Delta and Central Plains faced oil shortages, the same companies increased their imports. Just a few days ago, sources from Sinopec confirmed that due to stabilized supply and demand, diesel imports for January were reduced, and February might see a suspension of diesel imports altogether. Argentina recently banned oil exports, and Sinopec is considering halting diesel imports. This may reflect the real situation in the country. However, I’m skeptical that Sinopec’s decision to stop importing is purely strategic. It seems like they’re waiting for an oil shortage to justify emergency actions—increasing imports, cutting exports, and ramping up production. I remember when oil was trading between $70 and $80 a barrel. In my previous article on fuel tax reform, I argued that buying oil isn’t like buying cabbage; you can’t just buy a lot and let it rot. Oil should be stored and used gradually. With $1.5 trillion in foreign exchange reserves, which are losing value daily, purchasing oil could be a smarter move. For instance, buying $10 billion worth of oil last year would have yielded a profit of around $20 per barrel this year. That’s better than investing in Blackstone. Not only does it help counteract dollar depreciation, but it also allows for a $20 profit per barrel and saves money for future purchases. Three benefits in one. For the country, all it takes is building more storage tanks. We have enough steel. Our own oil reserves can be tapped slowly, without sending them abroad for future generations. Unfortunately, this logic doesn’t apply to Sinopec or PetroChina. They operate on a monthly basis, barely planning ahead. They don’t function under a planned or market economy—they’re stuck in a monopolistic system that relies on price hikes and subsidies. Don’t be fooled by their profits or their size. Their business acumen is lacking, and they waste resources without thinking. No wonder Warren Buffett decided to sell his Sinopec shares. He probably thinks monopolies take too long to lose their edge.

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