Domestic oil prices growing slower than international pace

14:28, August 17, 2010      

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The growth rate of refined oil prices in China's domestic market is smaller than that of global crude oil prices, said an official from the National Development and Reform Commission (NDRC) in an interview with People's Daily, clarifying recent public doubt that domestic oil prices continue to rise while international oil prices are dropping.

The official said that since China introduced a new refined oil price mechanism at the end of 2008, the crude oil price on the international market has increased from 45 U.S. dollars per barrel to about 76 U.S. dollars per barrel, an increase of 70 percent.

However, the cumulative rate of increase of refined oil prices in the domestic market have been no more than 30 percent after 10 price adjustments, including six times when the price increased and four times where the price decreased.

If the refined oil prices were converted into the crude oil price, then the crude oil price on the domestic market increased from 45 U.S. dollars per barrel to the current 68 U.S. dollars per barrel, meaning China's oil prices saw a lower growth rate than that of the international price.

In order to relieve the influence caused by the substantial increase in oil prices in the international market, China began regulating and controlling the refined oil price twice a year since 2003. Therefore, the rate of increase of the domestic oil price is far lower than that of the international market.

The official said that the oil price in the international market reached a historical peak of 147 U.S. dollars per barrel in 2008. Despite the domestic refined oil price hike on June 20 of the same year, the refined oil prices at home were equivalent to the oil price of only 84 U.S. dollars per barrel abroad, with a price gap as high as about 60 U.S. dollars.

The government conducted a reform in pricing, taxes and fees of refined oil prices at the end of 2008, raising the consumption tax on gasoline and diesel by 0.8 yuan and 0.7 yuan per liter, respectively. If the consumption tax hike were not considered, the current post-production gasoline price would be equivalent to nearly 6,100 yuan per ton, 400 yuan lower than the gasoline price after it was lifted on June 20, 2008, the official said.

The official added that the government will continue to moderately adjust domestic refined oil prices in a timely fashion while strictly following principles and directions set by the reform in pricing, taxes and fees for refined oil. At the same time, it will take into account factors such as changes in the international oil price, domestic economic situation as well as the demand and supply in the refined oil market.

By People's Daily Online
Additional support provided by LOTO


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