China closes gap on international oil prices
(Xinhua)
Updated: 2006-05-25 14:12
The Chinese government raised the prices of gasoline, diesel and aviation
kerosene by 500 yuan (62.4 US dollars) per ton on Wednesday.
Of the nine
price hikes for refined oil products since July 2003, including two this year,
this is the highest as the prices of gasoline and diesel have each risen by over
10 percent.
While the industry and markets reacted optimistically,
motorists admitted to more caution about taking their cars out.
"Higher
prices on oil products will encourage efficiency," said Zhang Guobao,
vice-chairman of the National Development and Reform Commission (NDRC) at the
international seminar with a theme of "Energy Security: China and the World".
Niu Li, an economist with the State Information Center, said the hike
continued the policy of reducing the gap between international and domestic
prices and connecting domestic price fluctuations to those of international
crude oil.
Despite soaring crude oil prices, the NDRC, which regulates
domestic prices according to changes on the world market, had kept domestic
prices relatively low, resulting in losses for processors and consumer waste.
An NDRC statement said prices of processed oil were far below those on
the international market, while crude oil had climbed to about 70 U.S. dollars a
barrel. "It is not helpful to processors in China nor to ensuring adequate
supplies."
The last price rise was on March 26, when the producer price
of gasoline was raised by 300 yuan per ton and diesel by 200 yuan per ton.
The current retail price of 93 gasoline is 5.09 yuan per liter, 0.44
yuan higher than two months ago.
"I will have to pay 50 yuan more on
gasoline after this rise," said Chen Yi, who earns 5,000 yuan a month in the
publishing industry.
Chen said gasoline was still affordable, but
admitted he would think twice about the cost before taking his car out.
"It is a step in the right direction," said Tao Dong, chief Asia
economist at Credit Suisse First Boston,
Tao said the rise would
encourage more efficient fuel consumption.
However, despite the
government's efforts to connect the hike to world prices, the gap was still as
much as 26 percent with international crude prices hitting new highs in the past
two months.
Major cities, including Beijing, Shanghai and Hangzhou,
capital of East China's Zhejiang Province, have already raised taxi fares this
year.
Those measures reduced the impact of price rises on those worst
affected by rising operating costs, said Niu.
He said as macro-economic
growth was stable and would suffer little effect from the rise, which was good
news for China's oil processors as it would reduce their losses.
The China
Petroleum and Chemical Corporation (Sinopec), China's largest oil processor,
reported losses of 7.88 billion yuan in the refining sector in the first quarter
despite a net profit of 9.13 billion yuan.
Responding to the news, the
petroleum and chemical sector of China's A share market held up well on
Wednesday despite Sinopec's suspension for its annual general meeting.
Analysts forecast buoyant Sinopec stocks and the total A share market
when Sinopec resumed trading on Thursday.
(For more biz stories, please visit Industry Updates)
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