China raised diesel retail prices by 4 per cent to 4,509 yuan (US$545) per ton yesterday in a bid to increase oil refiners' profit margins.
Drivers of diesel-fuelled vehicles will have to pay an additional 150 yuan (US$18) for every ton of fuel after yesterday's price rise, but petrol prices will remain unchanged, said sources from the National Development and Reform Commission.
The measure was taken to supplement the 8 per cent retail price hike in petrol on March 23, and is "within expectations," according to industry analysts.
"The country has chosen to adjust diesel prices after the farming season, when the price increase has a relatively minor impact on farming and deals only a slight blow to farmers' interests," said Gong Jingshuang, a senior analyst with a research institute under PetroChina, China's largest oil producer, in a telephone interview.
The price increase was also driven by the high cost of crude oil on the international market, which, although seeing a moderate retreat recently, is still lingering at a high level, said Zhang Jian, an analyst with Beijing-based China Securities.
Sinopec, Asia's largest oil refiner, increased the mean retail diesel price by 150 yuan (US$18) per ton, said the oil giant's website yesterday.
Its service stations can now charge users at the most 8 per cent more than the mean rate, said Sinopec.
Beijing raised diesel retail prices by an average 0.15 yuan (1.8 US cents) per litre yesterday, while Shanghai's diesel retail price rose by 0.18 yuan (2.2 US cents) per litre. In East China's Jiangsu Province the retail diesel price witnessed a 0.13 yuan (1.6 US cents) increase per litre.
The retail diesel price hike will have some impact on the world's fastest-growing economy, but its influence will remain moderate as the increase is only a slight one, according to industry experts.
Major sectors affected will be agriculture, transportation and heavy industries, which rely strongly on diesel fuel, said Zhang from China Securities.
And some sectors such as logistics, farming activities and road passenger transport will also suffer from the increased costs, said industry analysts.
Li Xianfa, a driver who works for a long-distance haulage company in Central China's Henan Province, said he will now have to pay some 30 yuan (US$3.6) more every day to cover the price hike.
The biggest beneficiaries will be the country's oil refiners, who will begin to see slight profits after they failed to cover production costs due to surging international oil prices and the low price of finished oil in the domestic market, according to Zhang.
One oil refiner under Sinopec in North China's Hebei Province said the retail diesel price hike will be conducive to boosting profits, but declined to give figures.
In foreign trade, diesel imports will increase, while exports will be dampened by the price jump, said experts.
"But the impact is still a slight one," said PetroChina's Gong, "as supply and demand is also a major factor affecting foreign diesel trade."
The low price of diesel in the domestic market has made diesel imports a marginal business.
China bought 145,000 tons of diesel from foreign countries in the first quarter, down 63.7 per cent year-on-year.
"For the overall economy, the recent price increases in power and diesel will likely trigger some degree of inflation if the central government does not work out pertinent policies to rein in the hefty fixed asset investment in some areas such as real estate," warned Zhang.
Wang Xiaohui, an industry analyst with Beijing-based CITIC Securities, projected that the country will take further measures to curtail the investment spree in some sectors.
