High crude oil prices are giving Chinese firms an incentive to pump more oil.
Many Chinese fuel consumers predict that fuel prices will rise even further at home, and they are none too pleased.
The State Development Planning Commission Monday enhance the average retail price of gasoline to 4,160 yuan (US$501.2) per ton from 3,980 yuan (US$479.5). And the price of diesel oil grew to 3,564 yuan (US$429.4) per ton from 3,264 yuan (US$393.3).
This is the seventh fuel price increase on domestic market since last November.
Analysts predict that world crude oil prices are likely to exceed US$40 per barrel by the end of this year.
This is in spite of reports that the Organization of Petroleum Exporting Countries said on Sunday that it would raise oil output by 500,000 barrels a day if prices remain above the top end of its target range of US$22 to US$28 a barrel.
However, oil refineries have suffered because of the high prices. Consumers have also complained about the consecutive rises in fuel prices.
China's oil producers, spurred on by oil prices currently hovering around US$34 a barrel, are expected to increase output this year and produce more than they did last year, said Li Shensheng, deputy director of the Economic Research and Consulting Center under the State Economic and Trade Commission.
According to the National Bureau of Statistics, oil output was 108.3 million tons between January and August, an increase of 1.22 percent over the same period last year.
Domestic crude oil output was about 160 million tons last year.
Li described the high oil prices as a "mixed blessing" for China's ineffective oil sector.
World prices reached a fresh peak of close to US$36 a barrel last week from less than US$10 per barrel in March 1999.
Although a high price benefits oil producers, it puts a squeeze on refineries and fuel consumers.
The oil industry's profit surged by more than 30 billion yuan (US$3.6 billion) to 40.3 billion yuan (US$4.9 billion) during the first half of the year, which oil analysts said was mainly helped by the high oil prices.
But those profits are not helping the end users.
"I'm afraid I will have to pay even more for fuel because the price is expected to shoot up again," said Beijing taxi driver Wang Jialing.
The commission announced last month that it will adjust domestic fuel prices every month according to changes on the world markets.
It says fuel price increases are merely designed to bring domestic oil product prices more in line with world levels.
"Chinese oil producers should channel more of their profits into oil reserve prospecting and exploration when the prices are at a high level," said Yang Jingmin, a senior researcher at the Development Research Center of the China National Petroleum Corporation, one of the country's two largest oil giants.
For oil refineries, the most pressing task is to intensify efforts to upgrade technical equipment, reduce costs and develop new products, Yang said.
(China Daily)
