Nation cuts fuel prices 2nd time as cooling economy limits oil demand
By Richard Fu |
June 9, 2012, Saturday
|
Print Edition
Print Edition
MOTORISTS in China are getting further relief at the pumps as the government cut fuel prices for the second time in as many months in response to the recent decline in crude oil rates.
The reduction of 530 yuan (US$83) per ton for gasoline and 510 yuan per ton for diesel, or nearly 6 percent, is the largest since late 2008 when the current pricing system was introduced by the National Development and Reform Commission.
Effective today in Shanghai, the ceiling retail price for 93-octane gasoline is 7.58 yuan per liter, or US$4.50 per gallon, down from 8.01 yuan; 97-octane gasoline falls to 8.07 yuan from 8.52 yuan; and zero-grade diesel is now 7.48 yuan down from 7.92 yuan.
Sellers are allowed to set prices below the cap, as they did in recent weeks to lure customers in the wake of falling crude prices on global markets, a result of the global economic slowdown that is curbing demand.
The NDRC 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.
Fuel prices should be lowered by 620 yuan per ton to fully reflect the change in the crude basket, which had fallen by about 10 percent since the last revision on May 10, according to C1 Energy.
"The cut is smaller than expected, probably because authorities want to protect domestic refiners from serious losses," Liao Kaishun, an analyst with C1 Energy, was quoted as saying by the Xinhua news agency.
Inflation likely muted
"I think this time they acted quickly but not enough, I hope we never get back to the '8 era' again," said local driver Liu Ke, referring to a term coined by Chinese media earlier this year when fuel prices first appreciated beyond 8 yuan per liter.
The NDRC has long been criticized by the public for not acting swiftly when crude prices fall but moving very fast when they rise. The commission has said in the past that it actually had delayed or cut the size of price increases due to inflation concerns.
The country's consumer price index, a main gauge of inflation, may drop below 2 percent if fuel prices continue to fall, Xiang Yue, an analyst with Great Wall Securities, told Xinhua. China's inflation rate has been slowing, falling to 3.4 percent in April from 3.6 percent in March. It is widely expected to ease further in May due to falling food prices and other effects.
Lower fuel prices will hurt the refining business of Sinopec Corp and PetroChina Co. Liu Li-Gang , chief China economist with Australia and New Zealand Banking Group said China's proposed crude oil futures, which the Shanghai Futures Exchange plans to launch within the year, will give oil producers a new channel to hedge their oil positions and the spread between crude and refined products, and will reduce their foreign exchange risk if the contracts are settled in yuan.
The reduction of 530 yuan (US$83) per ton for gasoline and 510 yuan per ton for diesel, or nearly 6 percent, is the largest since late 2008 when the current pricing system was introduced by the National Development and Reform Commission.
Effective today in Shanghai, the ceiling retail price for 93-octane gasoline is 7.58 yuan per liter, or US$4.50 per gallon, down from 8.01 yuan; 97-octane gasoline falls to 8.07 yuan from 8.52 yuan; and zero-grade diesel is now 7.48 yuan down from 7.92 yuan.
Sellers are allowed to set prices below the cap, as they did in recent weeks to lure customers in the wake of falling crude prices on global markets, a result of the global economic slowdown that is curbing demand.
The NDRC 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.
Fuel prices should be lowered by 620 yuan per ton to fully reflect the change in the crude basket, which had fallen by about 10 percent since the last revision on May 10, according to C1 Energy.
"The cut is smaller than expected, probably because authorities want to protect domestic refiners from serious losses," Liao Kaishun, an analyst with C1 Energy, was quoted as saying by the Xinhua news agency.
Inflation likely muted
"I think this time they acted quickly but not enough, I hope we never get back to the '8 era' again," said local driver Liu Ke, referring to a term coined by Chinese media earlier this year when fuel prices first appreciated beyond 8 yuan per liter.
The NDRC has long been criticized by the public for not acting swiftly when crude prices fall but moving very fast when they rise. The commission has said in the past that it actually had delayed or cut the size of price increases due to inflation concerns.
The country's consumer price index, a main gauge of inflation, may drop below 2 percent if fuel prices continue to fall, Xiang Yue, an analyst with Great Wall Securities, told Xinhua. China's inflation rate has been slowing, falling to 3.4 percent in April from 3.6 percent in March. It is widely expected to ease further in May due to falling food prices and other effects.
Lower fuel prices will hurt the refining business of Sinopec Corp and PetroChina Co. Liu Li-Gang , chief China economist with Australia and New Zealand Banking Group said China's proposed crude oil futures, which the Shanghai Futures Exchange plans to launch within the year, will give oil producers a new channel to hedge their oil positions and the spread between crude and refined products, and will reduce their foreign exchange risk if the contracts are settled in yuan.
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