The National Development and Reform Commission (NDRC) announced Tuesday a cut in retail gasoline and diesel prices by 420 yuan and 400 yuan per ton respectively, effective from Wednesday, following a drop in international oil prices of more than 9 percent since the last fuel price adjustment in June.

Domestic gasoline prices will be lowered by 0.31 yuan per liter and diesel prices by 0.34 yuan per liter, said a statement posted on the NDRC’s website on Tuesday. After the price adjustment, the price of 92-octane gasoline in most areas will be under 7 yuan per liter.

The NDRC has cut fuel prices three times this year. On May 10, it lowered prices by over 300 yuan per ton, and on June 9 it cut prices by more than 500 yuan per ton, the biggest cut in almost three years.

The decline in international oil prices last month has been even bigger than in the period before the previous price adjustment in June, and analysts said that a price cut of 400 yuan per ton is actually smaller than the drop in international oil prices.

“The price adjustment should be some 580 yuan per ton, if international price changes were to be fully reflected,” Zhou Minzhen, an industry analyst with consulting firm ICIS C1 Energy, told the Global Times Tuesday.

Zhou said that the NDRC may be aiming to guarantee a proper profit margin for oil refineries by adjusting the price cut, given that most domestic refineries are still suffering from losses currently.

This is the first time there have been three consecutive cuts in domestic oil prices since the NDRC launched the current pricing scheme in 2009, but analysts said that there is not likely to be a fourth consecutive drop.

“International oil prices are expected to see a moderate increase in the third quarter,” said Wang Jintao, an industry analyst at commodity information provider Zibo Zhongyu Information Technology Co.

International oil prices already saw a moderate rebound after the European Union launched an economic stimulus plan at the end of last month. The benchmark Brent crude has already climbed back to over $100 per barrel currently.

Under the current pricing mechanism for China’s oil products, the NDRC adjusts gasoline and diesel prices when the average of a basket of crude oil prices – Brent, Dubai and Cinta – changes by 4 percent over 22 working days.

Zhou Wangjun, an official with the NDRC’s pricing department, said Monday that the commission would launch a new pricing mechanism, which is intended to be more market-oriented, when international oil prices return to a reasonable level.

“The third quarter would be the right time to introduce a new mechanism… and since international oil prices are not likely to change drastically in the near future, domestic oil prices will remain unadjusted in the next one or two months,” said Wang from Zibo Zhongyu Information Technology.

“The price cuts can save me about 50 yuan each month. I may drive more often if the gasoline price remains this low,” said Liu Zhi, a 30-year-old civil engineer in Beijing, who spends some 700 yuan on gasoline every month.

By Liang Fei