Tags: China | Hikes | Fuel | Prices | Inflation | Impact

China Hikes Fuel Prices, Vows to Fight Any Inflation

Tuesday, 21 Dec 2010 09:46 AM

China will raise retail gasoline and diesel prices by about 4 percent to record high levels on Wednesday, the third increase this year, a move set to lift refiners' margins amid record Chinese fuel consumption.

The unexpected price increase came as China's headline inflation rose to a 28-month high in November at 5.1 percent from a year earlier, but the government said it would not let the increases cause an inflationary "chain reaction."

The country's economic planning agency, the National Development and Reform Commission, which also raised jet fuel prices by about 5 percent, said airlines, railway freight and public transport operators would not be allowed to pass on the higher cost of fuel to their own customers.

Explaining its decision to raise prices, the NDRC said China's oil demand was rising rapidly and foreign oil dependency would be close to 55 percent this year, up from 53 percent in 2009. It also promised to crack down on anyone hoarding fuel or conspiring to drive up prices.

The retail price ceilings for gasoline will rise 310 yuan per ton while diesel and benchmark jet fuel prices will rise by 300 yuan per ton.

China last adjusted prices on Oct. 26, when gasoline and diesel went up by about 3 percent and jet fuel by about 4 percent.

The latest hike came as data showed the world's second-largest oil consumer used a record 9.34 million barrels per day last month, an increase of nearly 14 percent over a year earlier.

"Fuel prices have to follow the market rules. When crude rises but not the refined products, refineries will have a difficult time," said an executive with top refiner Sinopec Corp. who declined to be named.

Higher pump rates will motivate dominant state refiners to maintain record processing rates, which were already easing a diesel shortage that started a few months ago as small manufacturers, cut off from state power supplies, switched to stand-alone diesel generators instead.

The NDRC said earlier on Tuesday that China's apparent diesel consumption surged 21.4 percent on year to a record 3.42 million bpd in November.

China has since 2009 been running a fuel price system that tracks a basket of crude prices plus an undisclosed margin.

A rise of 4 percent in crude costs over 22 working days would trigger a hike, but the government had said refiners should not expect to earn "normal" margins when crude climbs above $80 per barrel, which had tempered expectations of another rise.

CBI, an industry consultancy, said on Tuesday that the basket of crude prices used by the government as a guide for retail fuel prices had gained more than 9 percent since the last price rises on Oct. 26.

© 2017 Thomson/Reuters. All rights reserved.

   
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China will raise retail gasoline and diesel prices by about 4 percent to record high levels on Wednesday, the third increase this year, a move set to lift refiners' margins amid record Chinese fuel consumption. The unexpected price increase came as China's headline...
China,Hikes,Fuel,Prices,Inflation,Impact
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2010-46-21
Tuesday, 21 Dec 2010 09:46 AM
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