The State will not set the monthly benchmark price for diesel and
gasoline in hopes of discouraging speculation in the domestic oil
market, according to a circular released last night by the State
Development Planning Commission.
The circular did say the State will consider the condition of the
domestic market when adjusting the benchmark price.
In
the past the benchmark price was decided only by the rates on the
Singapore market.
But in the circular, the commission said it would now adjust the
benchmark price for refined oil products when the average price on
Singapore, Rotterdam and New York changes by "a certain
margin.''
The circular did not specify what the margin should be. But it said
China would base the factory price of diesel and gasoline on the
average free on board prices of the top three oil trading hubs
listed above.
A
Guotai Jun'an Securities analyst said the average price from the
three markets, instead of the Singapore market alone, better
mirrors the international markets.
Recently, Li Yizhong, president of Sinopec, the largest refiner in
Asia, complained to the People's Daily that the past pricing
mechanism was easy to manipulate.
"But under the renewed pricing mechanism, speculators can hardly
anticipate when the benchmark price will change,'' the Guotai
Jun'an Securities analyst told China Daily.
The circular said the retail price will be allowed to rise or drop
by 8 percent from the benchmark price, rather than the 5 per cent
used in the past.
An
official from the pricing department of Sinopec said the broader
floating range will give more freedom to Sinopec and PetroChina,
the nation's second largest refiner, to decide retail prices.
"It is absolutely good news for us because the retail price will be
more flexible,'' the official said.
To
help keep oil prices from fluctuating however, the circular said
the commission will set a range for gas and diesel prices to stay
within.
(China Daily
10/17/2001)