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Oil Prices to Change to World Market Monthly
Industry sources said Tuesday the Chinese Government has decided to modify domestic refined oil prices once a month in line with fluctuations on the international market.
The State Development Planning Commission, which supervises the country's pricing system, will set refined oil prices monthly beginning this month, said the sources, who declined to be identified.
The prices will be equal to the combined sum of the average prices in Singapore market last month, and some reasonable premium to account for costs and losses in transportation, the sources said.
A commission official was unwilling to confirm or deny reports of a new pricing method, although the overall direction towards reform is widely known in the oil industry.
In a televised conference earlier this month, commission Minister Zeng Peiyan said the reforms could help the domestic pricing system respond more quickly to fluctuations on the international market.
The rapid jump of international crude prices in the past two years has challenged the stability of domestic oil production. The old rigid refined oil pricing system must be modified, Zeng said.
The State Administration of Taxation recently released a circular ordering all gas stations nationwide to install electric equipment to calculate tax before October, paving the way for fuel taxes to be collected in the future.
Experts said the new pricing system and tax will help form an orderly oil product market.
International oil prices have soared to nine-year highs of over US$30 per barrel since mid-March, and are expected to remain high in the coming future, although the upcoming OPEC conference in Vienna on June 21 could revise the current situation.
Since 1993, China has become increasingly reliant on oil imports.
The country imported 22.72 million tons of crude oil in the first four months this year, a 20 per cent increase over the same period of last year, according to customs statistics.
In line with fluctuations in the international market, the commission raised benchmark prices of gasoline and diesel four times in the past seven months. The latest hike, which took effect on June 5, came only a month after the third.
In June 1998, the commission reformed former rigid crude oil pricing system and formed a market-oriented mechanism in line with international practice.
However, domestic refined oil prices set by the commission have still lagged behind the volatile fluctuations in the international market.
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