Policymakers working out when to link the nation's lower refined
oil price to the international market are under pressure after
global crude oil crossed $100 a barrel on Wednesday.
When the global price rose to $90 a barrel, a spokesman for the
National Development and Reform Commission (NDRC) said it was in a
"difficult situation" reforming the country's energy and resources
pricing system.
The crude price in China is already decided by the global
market, but the refined price is still regulated by the
government.
"It's not good timing because China is already in a
high-inflation cycle," said the NDRC spokesman, adding that curbing
inflation is a priority in 2008.
Analysts said it's unlikely the government will raise the
refined oil price and the central government will continue to
subsidize refiners that have run at a loss for years due to higher
import costs.
Lin Boqing, director of the China Center for Energy Economics
Research at Xiamen University, said energy pricing reform,
especially for refined oil, should continue and that the government
has said repeatedly "it is necessary to reform the pricing
mechanism of resource products to further improve efficiency".
"But the reform should be implemented at the right time with due
consideration for all concerned," said Lin.
Lin said low energy prices have increased the competitiveness of
China's high-energy-consuming, high-polluting and resource-based
products, enlarged trade surpluses and exaggerated yuan
appreciation pressure. "Reform is a matter of urgency," said
Lin.
China has raised the refined oil price four times since 2006.
The current average price is about $65 a barrel. The global crude
price skyrocketed from $70 a barrel in July last year to $100 a
barrel on Wednesday.
Some refiners have stopped production due to higher costs, which
led to a supply shortage in coastal areas. The government urged
China National Petroleum Corp and China Petroleum and Chemical
Corp, the nation's two largest oil producers, to go all out to
ensure fuel supplies.
Fuel shortages eased after prices began climbing in November,
but many regions still face a tight diesel supply. The commission
raised the prices of gasoline, diesel oil and aviation kerosene by
500 yuan per ton, a rise of around 8 percent. The average retail
price of gasoline now stands at 5,980 yuan per ton, and diesel is
5,520 yuan per ton.
(China Daily January 4, 2008)
