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Cover Stories Series 2012> Q1 Economic Growth Stable> Video
UPDATED: March 20, 2012
China Raises Fuel Prices Amid Easing Inflation

China will increase gasoline and diesel prices by 600 yuan ($95) per tonne beginning Tuesday, the National Development and Reform Commission (NDRC) announced Monday evening.

The adjustment will raise the benchmark retail price of gasoline by 0.44 yuan ($0.07) per liter and diesel by 0.51 yuan ($0.08) per liter, the country's top economic planning body said in a statement on its website.

The latest decision to raise the prices came after international crude oil prices climbed more than 10 percent since February 8, when the retail prices of both gas and diesel was raised by 300 yuan ($47) per ton each, according to the statement.

Since then, international oil prices have registered large increases due to the impact from the nuclear crisis in Iran and other factors, the statement said.

The Chinese Government adopted an oil pricing mechanism at the start of 2009 that allows the NDRC to adjust retail fuel prices when international crude oil prices change by more than 4 percent over 22 working days.

Analysts say the necessary price changes have finally come, although at a delayed date.

"By March 8, average crude oil prices in the Brent, Dubai and Cinta markets had risen by 8.92 percent over 22 working days, but the NDRC did not announce the price hikes, as China's annual parliamentary session was being held," said Hu Huichun, an oil market analyst from Shanghai Composite Index (SCI), a leading commodity information portal.

Analysts say the size of the price hikes is largely in line with market expectations. Previous market estimates put the price hike between 400 yuan ($63) and 700 yuan ($111) per ton.

The price rise will also be the largest since June 30, 2009, when the NDRC raised gas and diesel prices by 600 yuan ($95) per ton.

Chen Qing, another SCI analyst, said easing inflation and subsidy programs prepared in advance by the government were the two biggest factors in the NDRC's decision to raise prices.

Government data showed that China's consumer price index (CPI), a main gauge of inflation, rose 3.2 percent year-on-year in February, marking the lowest rate of growth in 20 months. It eased from a 4.5-percent rise registered in January.

The NDRC said the government will provide subsidies for people working in the fishery, forestry and public transport sectors, as they will likely be heavily impacted by the hikes.

To maintain prices, the government has also ordered railway and urban public transportation administrators not to hike prices.

Analysts say the impact from the price hikes will be limited to pushing up inflation, as product oil only accounts for 0.5 percent of the basket of goods used to calculate China's CPI.

Goldman Sachs data showed that the hike is expected to add about 0.37 percent to the CPI's rise this month.

However, the NDRC warned that China is facing mounting pressure to meet increasing fuel demand at home, in addition to a heightened reliance on imports.

(CNTV.cn, Xinhua News Agency March 19, 2012)

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