Fuel prices could rise on weaker New Taiwan dollar
Fuel prices in Taiwan are expected to move higher next week as a falling New Taiwan dollar offsets the effects of a drop in international crude oil prices, market sources said Saturday.
State-owned CPC Corp. Taiwan ( ) is likely to announce a NT$0.1 (US$0.006) per liter hike in the prices of gasoline and diesel after a drop of NT$0.8 per liter earlier this week. The expected hike will break a threeweek losing streak for domestic fuel prices.
The CPC calculates its fuel prices based on a weighted oil price formula, which is comprised of 70 percent Dubai crude and 30 percent Brent crude.
prices trended lower during most of this week due to an increase in oil inventories in the market. But the benefits of the lower international crude prices have been eroded by the weakness of the New Taiwan dollar this week.
Crude prices for September delivery in New York closed up 0.6 percent at US$42.50 per barrel overnight on a rebound. But for the entire week, U.S. crude still fell more than 3 percent. In London, Brent crude prices closed up almost 1 percent for the week.
Since Tuesday, the New Taiwan dollar has recorded deep deprecation against the U.S. dollar for three trading sessions in a row as the local currency followed the Chinese yuan’s downturn to move lower.
The weakness of the yuan resulted from a move by the People’s Bank of China (PBOC) to cut the Chinese yuan’s reference rate sharply, leading the yuan to weaken in a bid to boost the country’s exports and lift the economic growth.
On the back of the close business ties with China, the New Taiwan dollar also fell sharply against the U.S. dollar, while intervention by Taiwan’s central bank to prop up the U.S. dollar dealt another blow to the local currency. On Friday, the New Taiwan dollar continued a downtrend due to the central bank’s intervention despite a rebound staged by the yuan.
This week, the New Taiwan dollar fell almost 1.9 percent against the greenback, which has made import- ed commodities, like crude oil, more expensive.
Although the average price of a barrel of crude under CPC’s weekly floating price formula stood at US$49.32 as of Aug. 14, down from US$49.83 seen in the previous week, the state-owned oil company could still raise fuel prices next week, the sources said.
If the price reductions are implemented next week as expected, prices at the pump will rise to NT$21.3 per liter for super diesel, NT$23.4 per liter for 92 octane unleaded gasoline, NT$24.9 per liter for 95 octane unleaded gasoline and NT$26.9 per liter for 98 octane unleaded gasoline. The CPC is scheduled to announce the weekly price adjustments Sunday noon.