In recent weeks, the volatility of crude oil prices has been a topic of great concern for both consumers and industry experts alike. On May 9, 2022, Brent crude oil futures experienced a significant drop of 6.35%, closing at $105.25 per barrel. This downward trend continued on May 10 with another decrease of 4.1%, bringing the price down to $101.6 per barrel. In just two days, the price plunged from a previous high of $113.22 to the aforementioned low, resulting in a notable cumulative decline of 10.26%. Observers have raised questions about whether this decline will lead to a reduction in domestic gasoline and diesel prices in China when the adjustment window closes on May 16. However, the situation may not be as favorable as some might have hoped. Understanding the pricing mechanism for domestic fuel is essential to grasp the complexities of this issue. In China, the adjustment of gasoline and diesel prices is primarily based on the average prices of crude oil in the international market. This is outlined in the "Petroleum Price Management Measures," a regulatory framework explicitly stating that price adjustments are made based on a 10-working-day cycle. Interestingly, while the document provides a general guideline, it does not specify the exact calculation methods involved. It does clarify, however, that if the international oil price falls below $40 per barrel or rises above $130, domestic fuel prices will be frozen, meaning they will not increase or decrease. Essentially, the price adjustment is influenced by the weighted average price over the specified period. To illustrate, if the weighted average price of crude oil for the preceding ten workdays was $108 per barrel and the current period’s average is $103, we can anticipate a decline in domestic fuel prices. Conversely, if the current average is $115, we would likely see an increase. Despite the recent downturn in oil prices, it's critical to remember that the significant price increases prior to this dip may still hold sway over the overall pricing landscape. For instance, just in the month leading up to May, crude oil prices surged on two notable occasions. The first increase occurred between April 12 and April 18, when Brent crude rose from $102 to $111. This surge contributed to a rise in the weighted average price during the pricing window that ended on April 29, which ultimately led to increases in domestic gasoline prices. Following this hike, oil prices saw a brief decline, only to rebound sharply starting April 26. The underlying reason was the European Union's near consensus on halting oil imports from Russia, spurring market fears concerning supply shortages. As a result, prices surged again, culminating with Brent crude reaching over $113 per barrel on May 6. As we approach the crucial price adjustment date of May 16, it's important to note that the closing price from the first trading day of this cycle already stood at $106 per barrel. Despite the recent declines on May 9 and 10, the earlier high prices are likely to exert a considerable influence on the weighted average. As of May 10, data from industry analysts indicated that the weighted average price change was approximately 5.02%. Consequently, if this trend continues, we could see an increase of about 255 yuan per ton in domestic fuel prices, translating to an increase of approximately 0.21 yuan per liter for both 92 and 95 octane gasoline and diesel fuels. It's also noteworthy that there are still three more working days left in the current pricing cycle. If international oil prices were to decline for a consecutive three-day stretch, domestic prices might not necessarily rise. However, the current environment reveals that international oil markets are highly unstable, with no definitive trend of either sustained increases or decreases. Given that there have already been two consecutive days of declines, further sharp decreases in the next three days appear unlikely. The drastic price movements on May 9 and 10 can be attributed to two main factors: the prior significant price hikes created an ample margin for a technical pullback; and the EU’s re-evaluating their plans for sanctions against Russian oil, especially after concerns from Hungary regarding the economic ramifications of cutting off Russian oil supply. While these developments caused short-term fluctuations in oil prices, the long-term implications of sanctions against Russia remain a crucial driver for the market. The US has already excluded Russian oil from its supply chain, leaving a waiting game for the EU's final decision. Moreover, the Western world’s hopes to replenish the gap left by Russian oil by turning to major producers such as Saudi Arabia and the UAE have encountered stumbling blocks. These leading oil producers are hesitant to increase production levels, not wanting to appear to capitalize on Russia's misfortunes, knowing that their relationships could be compromised. It is essential to recognize that while the Western powers may have grievances with Russia, OPEC+ as a whole does not share the same animosity. The persistent high prices of international crude oil have inevitably imposed additional financial strain on drivers in China. The increased cost of transportation is unlikely to change in the foreseeable future, leaving consumers with limited options other than reducing travel or relying more heavily on public transportation. Unfortunately, this predicament particularly burdens the truck drivers who depend on transportation for their livelihoods. In conclusion, while recent developments have stirred speculation about potential price adjustments, the underlying factors contributing to oil price stability and future trends are far more complex. The interplay between international sanctions, fluctuating production capacities among major suppliers, and geopolitical tensions will continue to shape the landscape of global oil prices moving forward.