Another oil price hike to curtail car sales

08:50, April 07, 2011      

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China's government once again raised gas and diesel prices from Thursday, as chaotic situation in North Africa and Middle East has sent global crude prices on a rollercoaster run.

The National Development and Reform Commission, the government's top economic planner, said the domestic wholesale price of regular gasoline will rise by 500 yuan for each ton, or an extra 0.37 yuan per liter. Diesel prices will be lifted by 400 yuan a ton or 0.34 yuan each liter.

It's China's second fuel price rise this year and the fifth hike since the beginning of 2010.

Beijing's approval for the country's two biggest state-majority-owned gas companies, Sinopec and PetroChina, to charge more from gas sale is deemed to be a policy shift from previously encouraging private car ownership to conservation of the fossil fuel, experts say.

As the world's second largest oil consumer, only after the United States, Beijing has come to recognize that the country's huge appetite for oil is not sustainable. Despite the average higher selling prices and taxes levied on cars and SUVs, compared with those in the developed countries, increasingly affluent Chinese families are gobbling them.

To rein in avid purchasing power of the customers, local authorities in Beijing, Shanghai and other cities have restricted vehicle sales by charging extra levies on plates, or by distributing plates via lottery.

On the global market, cascading violence and unrest in Libya and oil-producing cartel OPEC's reluctance to increase output pushed U.S. crude price to more than $108 on Tuesday. The cost of a barrel of Brent crude, sourced from the North Sea, hit $119.95, its highest level since August.

The steadily rising gasoline prices will inevitably have a negative impact on car consumption in the country, particularly, in the sprawling, less developed middle- and small-sized cities, where the average workers' pay is about half or less of their counterparts in the big cities, like Shanghai and Beijing.

To lessen the burdens of rising gas prices on farmers, bus fleets and taxi drivers, Beijing said that the government will offer subsidies for them.

However, for the private car-owners, increasing gas charges means higher bills or a bigger dent on their family budgets. To make things worse for them, inflation has been running high since late 2010, forcing Chinese families have to pay more on grain, vegetables, fruit, meat, eggs and the utilities, including tap water, cooking gas and electricity.

A good number of online commentators, while complaining about inflation and the rising oil prices, began to admit that car-ownership has been proved to be "too costly", and many said that they would drive less and take the public transit for commuting.

Whether the current round of oil price hike will exacerbate inflation in China, which surged to 4.9 percent in the first two months this year, and is forecasted to exceed 5.0 percent in March, remains to be gauged.

The People's Bank of China, the central bank, raised the benchmark one-year saving and lending interest rates by a quarter-percentage point on Wednesday, a move widely considered short of taming elevated inflation in the country.

By Li Hong, People's Daily Online

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