This last development has the following positive implications on Longwei Petroleum (LPH):
- This indicates that demand for fuel energies is strong in Shanxi province, particularly in Taiyuan metropolitan. It also indicates that growth in supply is probably limited and cannot satisfy growth in demand.
- It means that economy in Taiyuan area is doing very well and consumers are not slowing down in consuming more energy. Note that Shanxi’s yearly GDP growth rate has been higher than national average by significant extent for the past 15 years.
- Because natural gas is a competition to gasoline and diesel (i.e. gasoline/diesel and natural gas are alternative goods for many people), under economic principal higher natural gas price will decrease sales volume of natural gas and increase sales volume of gasoline and diesel in the area.
In conclusion, with this last development, the outlook for Longwei’s revenue growth is brightened further in my opinion.
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