The past few years have been tough for China's two big state refiners, Sinopec and PetroChina. A combination of high crude feedstock costs and government-controlled retail prices means they have been losing money at the pump, but have still been expected to crank out enough product to meet growing domestic demand. But this year could mark a turning point if, as expected, Beijing introduces a new product pricing mechanism. The current mechanism has been in place since 2008, but was largely ignored last year because of soaring inflation. China's refiners consequently started losing money from the second quarter. Retail gasoline and gasoil prices were raised by 6%-7% in two price adjustments in the first half of 2011, while a third adjustment in October actually lowered prices (PIW Mar.14' 11). The price of international crude benchmark Brent, in contrast, rose by more than 40% over the course of the year.
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