The fuel price hike would certainly pinch the pockets of consumers, but may not leave a lasting impact on the nation's economic recovery, according to analysts and experts.
But for many like the 24-year-old fashion writer He Yi, it is time to tighten their purse strings. Gasoline, diesel and jet fuel prices went up by as much as 11 percent from yesterday, the third increase this year and second in June, to reflect recent price changes in the global oil market.
He should consider herself lucky, as she was one of the few who gassed up her car just before the price hike. She can also take cheer from the fact that her vehicle is a Japanese model, known for its lower fuel consumption. But she is still determined to use less air-conditioning when driving, despite the scorching heat in Beijing.
According a survey by the Chinese web portal Sina.com, more than 90 percent of the 180,000 respondents said they were determined to drive less in response to the price hike, while over 94 percent thought fuel prices are too high now.
Pump prices for 90 octane gasoline in Beijing was set at roughly 5.71 yuan a liter, or about $3.16 a gallon, the National Development and Reform Commission, the nation's top economic planning agency, said in a statement on its website late on Monday. That compares with an average of $2.69 a gallon in the US, according to Bloomberg.
The government controls its retail fuel prices under a mechanism introduced in December that takes into account crude-oil costs, taxes and a profit margin for refiners. China may adjust fuel prices when crude-oil costs change more than 4 percent over 22 straight working days. Crude oil futures have risen 60 percent to more than $70 a barrel this year on signs of a global economic recovery that is spurring demand for fuel.
However, economists and analysts believe this round of price hike will not have any direct and obvious impact on the Chinese economy, which is largely fueled by coal.
"As China only needs oil to supply 20 percent of its energy consumption, costlier oil will not make things as bad as costlier coal," said Lin Boqiang, director of the China Center for Energy Economics Research at Xiamen University. "However, the economy will be hurt if higher crude prices drive up coal prices," Lin said.
In addition, China's consumer prices fell for a fourth month in May, making it easier for the government to raise oil prices, said Niu Li, senior researcher at the State Information Center.
The price hike comes amid a surge in demand for automobiles in the world's third-largest economy. Passenger car sales rose 47 percent in May to 829,100 units, the biggest jump since February 2006,
Chen Zheng, an auto industry analyst with China Securities Co, believed that Chinese people's demand for cars would not be seriously dampened by this round of price hikes, as China's car owners are largely social elite, who can afford to ignore moderate increases in gasoline prices. "But if oil prices continue to surge, I'm sure many people will stop buying new vehicles, especially the high-emission cars," Chen said.
Sinopec, the nation's biggest refiner, gained 0.7 percent to close at 10.66 yuan in Shanghai bourse yesterday, while its Hong Kong-listed shares rose 3.3 percent to HK$5.91.