Gas, diesel hikes to hit the pump with oil prices set to rise

10:14, April 14, 2010      

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The National Development and Reform Commission, China's top economic planner, will lift retail ceiling prices of domestic refined oil for the first time in more than five months by 320 yuan ($46.88) per ton starting today.

That will translate into a price hike of 0.24 yuan ($0.04) per liter of gasoline and 0.27 yuan per liter of diesel. The highest retail prices after the regulation goes into effect will be 8,220 yuan ($1,204) per ton for gas, an increase of 4.05 percent, and 7,480 yuan ($1,096) per ton for diesel, a 4.47 percent hike.

The market has been expecting the hike since late March, as global crude oil prices have risen rapidly since last month.

"The NDRC might delay price regulation to shun potential inflation pressure, ensure fuel demand in the southwest for drought resistance and spring plowing," C1 Energy said in a note to the Global Times.

Figures from the company, a subsidiary of domestic commodity information provider CBI China, showed that as of Monday the moving average of crude prices set by the Brent, Dubai and Cinta benchmarks went up 6.77 percent against the price set last November.

The refined oil pricing mechanism China adopted last May allows the NDRC to adjust domestic fuel prices when global crude oil prices and a basket of international crude comprised of the Brent, Dubai and Cinta benchmarks report a fluctuation of more than 4 percent over 22 straight working days.

The formula prompted five price hikes and three cuts in 2009.

Platts, a provider of energy and metals information, said the mechanism encourages higher processing rates because it not only guarantees an estimated 5 percent margin for the refiners, but also factors in their crude processing costs.

However, the mechanism has been condemned for being overly simplistic since it was first put into effect.

Analysts said it was highly predictable and led to speculative stockpiling of fuel ahead of anticipated increases.

Some analysts said shortening the price adjustment term might be a way to make price changes unpredictable. Others disagreed.

Zhong Jian, chief economist with industry website, said overly frequent adjustments might introduce abnormal fluctuations in the global oil market.



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