April 07th, 2011 | Caijing China Raises Fuel Prices to Rein in Consumption Growth
The ceiling for gasoline prices will rise by 500 yuan a metric ton and that for diesel price will increase by 400 yuan and the two largest oil refiners will no longer enjoy refining subsidiaries.
China plans to raise retail gasoline and dispel prices for the second time this year from Thursday, in an effort to rein in oil consumption growth using price leverage.
The ceiling for gasoline prices will rise by 500 yuan ($76) a metric ton and that for diesel price will increase by 400 yuan, the National Development and Reform Commission said late yesterday.
The adjustment, raising prices to guild and regulate consumption, is aiming to subdue excessive growth in fuel consumption in China, Asia’s biggest consumer, while meeting normal domestic market demand, an official from the top economic planner said.
Oil refiners have been running in red on negative refining margins for the sector, the same official said. Large refiners in the country, such as China Petroleum & Chemical Corp. and PetroChina Co., who provides ninety percent of nationwide demand, can sustain production on subsidiaries from upstream and downstream industry chains. The small and local refiners who produce the rest 10 percent of oil products, however, could have to face refinery outages as imported crude oil prices continue soaring, he added.
Brent crude touched 123 U.S. dollars a barrel on Wednesday, its highest since 2008.
The bigger percentage rise for fuel was expected, and China Petroleum & Chemical Corp. and PetroChina Co., the nation’s two largest refiners, will no longer enjoy subsidiaries on refining margins, an industry source told Caijing reporters.
When explaining the move, the same source said the government failed to adjust the fuel prices in place last time, or to put it in another way, the pace of price increases still lagged behind increases in global crude oil.
China last raised both gasoline and diesel prices by 350 yuan a ton, or 4.6 percent on February 20. The moving average crude oil prices of Brent, Dubai and Cinta have climbed more than 14 percent since then.
The fuel hike came just a day after China increased benchmark interest rates for the second time this year to curb inflation, raising suspicions that the data next week may present a risk of an erosion in inflation expectations.