Over the last 10 days, Shanghai has witnessed two rounds of price markdowns between domestic oil giants PetroChina and Sinopec.

On January 1, a week after its rival PetroChina cut fuel prices in Shanghai, oil giant Sinopec followed suit and slashed the prices of three major grades of gasoline and diesel oil by 0.25 to 0.35 yuan per liter in 44 Shanghai gas stations. After the cut, prices in these stations were 0.05 yuan lower than those in PetroChina's stations.

However, only eight hours later, PetroChina announced its second price cut, bringing the prices of three major types of gasoline and diesel oil down by 0.1 yuan. After this, the price for widely-used 93# gasoline went down to 4.66 yuan per liter, 0.4 yuan lower than the upper limit of 5.06 yuan.

Both PetroChina and Sinopec were counting on these price cuts to lift their sales volumes. According to Shen Xiangyang, deputy general manager of Sinopec's Shanghai branch, sales figures indicated that his company's revenues were slipping by 15 percent per day during the New Year holiday.

Since Sinopec's price cut is now only effective in 44 gas stations – less than 10 percent of its total retail outlets – and nearly half of these 44 stations are located in the suburbs, many Shanghai consumers cannot access the cheap fuel and there is growing resentment.

According to Oriental Morning Post, Sinopec's Shanghai branch called a meeting on Sunday to discuss how to respond to PetroChina's most recent price cut, but has not yet made any further moves.

"We are keeping a close eye on the issue and will decide whether to further cut prices or increase the numbers of cheaper gas stations based on daily sales data," said Shen.

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(China.org.cn by Yan Pei, January 5, 2009)