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Strong RMB to have mixed effect on oil
By Wang Ying (China Daily)
Updated: 2005-07-27 06:26

"Moreover, crude oil is not a product with much elasticity - a change in price would not induce shake-ups within the overall market. The current soaring crude prices on the international market will continue to hamper the country's oil imports," he added.

He Jun, a senior industry analyst and vice-president of Beijing Anbound Consulting Co, agreed with Deng in this respect, explaining that buying oil products is not merely about the market situation, but sometimes more to do with government concerns of a strategic nature.

"It (importing oil) should be a long-term plan, which is not affected much by instant market shifts - let alone the adjustment to the exchange rate is only a marginal 2 per cent," He said.

For the market of refined oil such as gasoline and diesel which has gone through frequent price changes, analysts said the yuan revaluation will be unlikely to result in a further fall of refined oil retailing prices, which saw a hike of around 7 per cent last Saturday.

"On the one hand, the current refined oil retailing prices on the domestic market are still much lower than those in the rest of the world. There is little room for the nation's refined oil retailing prices to fall," DRC's Deng said.

"And on the other, the impossibility of cutting domestic refined oil retailing prices also comes from the central government's effort to peg the domestic prices more closely with the overseas market, which has been showing a bullish trend," said Deng.
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