Boost for drivers as fuel prices cut
By Richard Fu |
July 11, 2012, Wednesday
|
Print Edition
Print Edition
CHINA has cut fuel prices by nearly 5 percent in response to falling international crude rates - the third reduction since May, when prices reached their lowest level since December 2010.
The price for gasoline was cut by 420 yuan (US$66) per ton and diesel by 400 yuan per ton, the National Development and Reform Commission said yesterday. That represented cuts of 4.6 percent and 4.8 percent.
At Shanghai pumps, the ceiling retail price for 93-octane gasoline is now 7.25 yuan per liter, down from 7.58 yuan; 97-octane gasoline falls to 7.71 yuan from 8.07 yuan; and zero-grade diesel is now 7.14 yuan, down from 7.48 yuan. The new prices, which vary from region to region, are effective from today.
The latest cuts come as domestic oil demand is weakening amid the economic slowdown.
"The cut in fuel prices will continue to ease inflationary pressures," said Zhou Hao, Australia and New Zealand Banking Group's China economist. "We believe such measures will lower production costs, encourage auto ownership, and help boost consumption."
Under a pricing mechanism introduced in late 2008, the NDRC, China's top planning body, may adjust fuel prices when the 22-day moving average of a basket of international crude changes more than 4 percent from the previous adjustment.
The crude basket had fallen 9.57 percent as of Monday, according to ICIS C1 Energy. At this level, domestic fuel prices should have been lowered by 580 yuan per ton if the pricing formula was rigidly followed, the consultancy said.
But the government scaled back the size of reduction to ensure some profit margin for the country's refiners, it said.
Mirae Asset Securities analyst Gordon Kwan last Friday said the brokerage had lowered its profit estimates for Sinopec Corp by 38 percent and 5 percent for 2012 and 2013 respectively to reflect "worse-than-expected downstream performance" in refining and petrochemicals. Sinopec is the largest refiner in Asia.
The NDRC has been working to improve the frequency of fuel adjustments as part of efforts to make the current pricing system more transparent and predictable.
But it may still need time for a new mechanism to be rolled out, said Zhou Wangjun, a deputy director in the NDRC's pricing department.
"This cannot be done when crude oil prices are too high or when crude prices are below domestic crude production costs. We need to find a middle point," the official said on Monday.
The price for gasoline was cut by 420 yuan (US$66) per ton and diesel by 400 yuan per ton, the National Development and Reform Commission said yesterday. That represented cuts of 4.6 percent and 4.8 percent.
At Shanghai pumps, the ceiling retail price for 93-octane gasoline is now 7.25 yuan per liter, down from 7.58 yuan; 97-octane gasoline falls to 7.71 yuan from 8.07 yuan; and zero-grade diesel is now 7.14 yuan, down from 7.48 yuan. The new prices, which vary from region to region, are effective from today.
The latest cuts come as domestic oil demand is weakening amid the economic slowdown.
"The cut in fuel prices will continue to ease inflationary pressures," said Zhou Hao, Australia and New Zealand Banking Group's China economist. "We believe such measures will lower production costs, encourage auto ownership, and help boost consumption."
Under a pricing mechanism introduced in late 2008, the NDRC, China's top planning body, may adjust fuel prices when the 22-day moving average of a basket of international crude changes more than 4 percent from the previous adjustment.
The crude basket had fallen 9.57 percent as of Monday, according to ICIS C1 Energy. At this level, domestic fuel prices should have been lowered by 580 yuan per ton if the pricing formula was rigidly followed, the consultancy said.
But the government scaled back the size of reduction to ensure some profit margin for the country's refiners, it said.
Mirae Asset Securities analyst Gordon Kwan last Friday said the brokerage had lowered its profit estimates for Sinopec Corp by 38 percent and 5 percent for 2012 and 2013 respectively to reflect "worse-than-expected downstream performance" in refining and petrochemicals. Sinopec is the largest refiner in Asia.
The NDRC has been working to improve the frequency of fuel adjustments as part of efforts to make the current pricing system more transparent and predictable.
But it may still need time for a new mechanism to be rolled out, said Zhou Wangjun, a deputy director in the NDRC's pricing department.
"This cannot be done when crude oil prices are too high or when crude prices are below domestic crude production costs. We need to find a middle point," the official said on Monday.
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