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Expert: Domestic oil prices should be increased
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16:57, June 30, 2009

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On June 29, National Development and Reform Commission announced the fourth oil price adjustment in 2009.

Because over 50 percent of China's oil demand depends on imports, rising international oil prices influence China's domestic market, and thus domestic oil prices should be increased, said Guo Qingfang, vice professor at the China University of Petroleum and research fellow at the China Energy Strategy Research Institute.

He noted that although the government-controlled price adjustment is inevitably passive, it should be in line with China's actual conditions. The pricing of oil products should not be excessively simplified; China should learn from international success stories, and require a long-term study of the country's actual conditions.

The market is an important means of price formation, but it must be combined with the domestic economic situation and the spending power of the general public. It has been proven that both the efficiency of international crude oil markets and the resource allocation ability of the market are open to discussion.

In addition, due to the impact of the international financial crisis, the domestic and international macroeconomic situation facing China is not optimistic. Market-oriented reform of the refined oil pricing mechanism should therefore fully take into account China's actual conditions. The current means and extent of price regulation and control are reasonable, reflecting China's actual conditions.

The rise in international oil prices is undoubtedly a burden for China, and a price that China's development must pay for the process of urbanization and industrialization. If demand is not restrained using the leverage of price, China would probably pay higher prices.

By People's Daily Online

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