China Raises Fuel Prices for the Second Time This Year

April 7, China, Asia’s largest oil consumer, raised retail prices of gasoline and diesel for the second time this year, starting Thursday, as international crude oil prices continue rising, China Business News reported on Thursday.

The benchmark retail price for gasoline will rise by RMB 500 a metric ton on April 7 and that for diesel will increase by RMB 400, the National Development and Reform Commission (NDRC), said on Wednesday.

The cost of No. 3 jet fuel will gain by RMB 500 to RMB 6,840 a ton, according to China’s top economic agency.

Rising oil prices in global markets are the main factor behind the increase, industry insiders were cited as saying.

By 23:30 Beijing time on Wednesday, light sweet crude touched $ 109.15 a barrel on the New York Mercantile Exchange, a new high in this round of rebounding prices, the paper said.

International oil prices have accumulatively gained about 20% after China adjusted retail prices on Feb. 20, the first increase this year, the paper said.

According to several energy information institutions, the retail price of 90# gasoline will rise by 5.63% to RMB 9,380 per tonne, and that of 0# diesel will gain 4.9% to RMB 8,530 per tonne, the paper said.

China adopted an oil pricing mechanism at the start of 2009 which allows the NDRC to adjust retail fuel prices when international crude oil prices change by more than 4% over 22 straight working days.

As inflation intensifies, the NDRC has postponed the timing of the rise in prices since the central government unleashed a series of policies to combat inflation in 2010.

Requirements for price adjustment were satisfied after March 22, but considering peak travel during the Qing Ming holiday and mounting domestic inflation pressures, the timing of the price change was postponed to April 7, the paper said.

This increase was lower than speculated, showing the nation is increasingly cautious about domestic oil price adjustment given the macroeconomic situation, the paper said.

“Processed oil prices mainly put pressure on the transportation sector. For instance, the carrying cost may account for a relative bigger part in the sale price of vegetables,” Shi Weixiang, an analyst from Guotai Junan Securities, told the paper.

The adjustment of domestic prices would likely push up prices of gas, coal and water.

Shi stressed that an upward adjustment of coal and electricity prices would have a bigger impact on consumer prices.

In the middle of last April, China raised gasoline and diesel prices by RMB 320 per tonne, which added 0.07 percentage points to the monthly gain of the consumer price index, the NDRC said at that time.

Shi added the government would provide subsidies to farmers, fishermen and public transportation systems in cities and offer temporary subsidies to taxi drivers to offset higher prices.

(Source: http://en.21cbh.com/HTML/2011-4-7/0MMjMyXzIwOTg0Mg.html)