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Fuel-pricing mechanism to stay, NDRC says

CHINA will stick to a fuel-pricing mechanism it introduced late last year, the top planning agency said today after a report that two major state oil companies are seeking changes in the system.

China may adjust fuel prices when global crude oil prices move by more than 4 percent from their moving average over 22 working days, the National Development and Reform Commission said in May when it gave details of the pricing system put in place since December.

But China National Radio reported yesterday that the pricing formula is "too simple and transparent," enabling speculators to predict official price changes that often lead to product hoarding.

The report said China Petrochemical Corp (Sinopec) and China National Petroleum Corp were in discussions with the NDRC for improvements and modifications in the rules, citing unidentified officials at the two oil firms.

The NDRC said today it will continue to enforce the pricing system, which takes into account crude costs, taxes and a profit for refiners. Last year, domestic refiners recorded big losses, even after being given state subsidies, as capped fuel prices prevented them from passing on soaring crude costs to consumers.

The new system has helped motivate refiners and ensured domestic fuel supplies this year, the NDRC said. The commission has cut fuel prices twice and raised them three times this year in response to global crude price movements.


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