The State Development Reform Commission on Wednesday raised benchmark gasoline rates by 300 yuan (US$36.30) per ton, or 8 percent, but kept diesel prices unchanged.
In Beijing, retail gasoline prices rose to a four-year high Wednesday. The benchmark 90-octane rose to 3.23 yuan (39 US cents) per liter from 2.99 yuan (36 US cents), while the 96-octane increased to 3.46 yuan (42 US cents) from 3.20 yuan (39 US cents).
The price adjustment was made to catch up with the rise in international crude oil prices. The US crude price has hit a 13-year high, rising above US$38 a barrel on worries about global supplies. Prices at the pumps in New York touched an 18-year high.
China has pegged its domestic refined oil products to average rates in Rotterdam, New York and Singapore. Sinopec and PetroChina, the only two authorized gasoline and diesel wholesalers, are allowed to raise or lower their retail prices by 8 percent from the government-set benchmark.
Gong Jingshuang, of the China National Petroleum Corp. Economic Research Center, said that demand for oil products will remain strong in the second quarter despite the price increase.
"The seasonal demand rise in the second quarter will help keep consumption high," said Gong.
A thriving auto market, together with rising investment in power, infrastructure and construction, is causing demand for oil products to soar. Chinese refineries have been running at top capacity for months, leading to a surge in crude oil imports in the first two months this year.
China, now the second largest oil consumer in the world, imported 10.5 million tons of crude oil in February, a 60.1 percent year-on-year jump.
Qi Jingmei, an economist with the State Information Center, said the price hike will pass the costs to millions of car users and will in turn mean rising prices in service industries.
"The oil price hike, along with price increases in grain, electricity, steel and coal, will add inflationary pressure," said Qi. "But in the long run, price increases are inevitable when the economy is growing so fast."
(China Daily April 1, 2004)
