China Considering a Tax on Light-Cycle Oil Imports
Chinese regulators are considering a new tax on light-cycle oil imports, a low-quality petroleum input that's blended into diesel and fuel oil, Bloomberg reported March 17. The Chinese government asked for feedback from energy companies on a draft plan and could be ready to implement the tax as soon as the first half of 2021, Bloomberg reported, citing people familiar with the discussions. Currently, LCO imports are exempt from China's fuel consumption tax. Demand for LCO imports skyrocketed in 2020 as China ramped up infrastructure projects to stimulate its COVID-ravaged economy, bringing most of the LCO in from South Korea, the report said.
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Importers had mixed reactions to the possible LCO import tax. According to London-based energy consultancy FGE, some importers will temporarily halt LCO orders due to fears over the tax. Michal Meidan, director of the China energy program at the Oxford Institute for Energy Studies, said that other importers may decide to stockpile LCO inventories before the tax comes into effect. Bloomberg said an extension of the existing fuel consumption tax to LCO imports would raise their cost by more than $200 per ton.