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Oil price increases unlikely to cause inflation
By Wang Ying (China Daily)
Updated: 2006-05-31 08:54 Following the price hike last week, China's top two oil companies, PetroChina
and Sinopec, both said the move could cut their refining losses, and that it
reflected the government's decision to move domestic prices closer to
international ones.
"The 500-yuan (US$62.5) increase is big, and I can
sense the government is showing a determination to change the pricing
mechanism," PetroChina Vice-Chairman Jiang Jiemin was quoted by Bloomberg as
saying.
Following the price increase, retail pump prices in China are
about 27 per cent lower than those in the United States, which are about US$2.9
per gallon on average.
PetroChina recorded a loss in refining and marketing
of 19.8 billion yuan (US$2.5 billion) last year.
Sinopec had a 7.88
billion yuan (US$985 million) operating loss from refining in the first
quarter.
The oil price increase obviously will hurt users, but will also
encourage people to save energy and improve efficiency, experts said.
The
Chinese Government earlier this year announced plans to subsidize economically
vulnerable groups, such as the farmers and taxi drivers, to cushion them against
the rising costs.
Beijing last week increased taxi fares by about 25 per
cent to pass on the oil prices increase to users.
"With oil prices on the
rise, the higher costs will push consumers to choose energy-efficient products,
which will help the country improve energy efficiency by 20 per cent by 2010,"
Zhou said.
Li Jun, 32, a Beijing-based journalist said he had planned to
buy a bigger car, but rising gasoline prices have led him to change his mind. He
now wants a small-sized car.
Zhou said if global crude oil prices
maintain their high level of about US$70 per barrel, there is room for the
Chinese Government to raise domestic oil product prices even
further.
Crude oil reached a record US$75.35 a barrel on the New York
Mercantile Exchange last month, the highest since trading began in
1983.
Industry analysts have predicted global oil prices are unlikely to
drop below US$50 per barrel in the near future.
The International Energy
Agency, a Paris-based advisor of 26 oil-consuming nations, forecasts China's oil
demand this year will rise by 5.3 per cent to 6.94 million barrels a
day.
(For more biz stories, please visit Industry Updates)
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