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Chinese Oil Demand Growth to Slow

Chinese Oil Demand Growth to SlowChinese Oil Demand Growth to Slow

Oil demand growth in the world’s biggest oil importer—China—is at risk of slowing down, at least in the coming months. Higher oil prices play a role in this, but the main culprit is a new tighter tax regime on independent Chinese refiners, which is already choking the refining margins and profits of the so-called “teapots” that have grown over the past three years to account for around a fifth of China’s total crude imports, Oil Price reported. The teapots have become instrumental in China’s growing thirst for crude oil after the government started allocating import quotas to independent refiners in 2015. Under the stricter tax regulations and reporting mechanisms effective March 1, however, the teapots now cannot avoid paying consumption tax on refined oil product sales—as they did in the past three years—and their profit bonanza is coming to an end. Despite ample government-approved crude import quotas, independent refiners are now losing money on refining.

 

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