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Planners happy to see fuel-price competition

CHINA'S top planning agency said domestic fuel prices will no longer "lag too much" behind international oil prices, but said it wouldn't adjust fuel rates too frequently.

The National Development and Reform Commission also said it was happy to see competition between pump stations as a result of the new fuel pricing mechanism.

The comment comes after Sinopec Corp and PetroChina Co, the nation's two dominant fuel suppliers, engaged in a price war in many regions to compete for customers.

In the past, the government allowed distributors to charge 8 percent more or less than a state-set guidance price. Under the new system, announced last month, there is no floor, allowing more freedom to reduce prices.

Sinopec and PetroChina have been cutting the price of gasoline and diesel in many cities, including Shanghai, since late last month. Their reductions have already made pump prices at some stations below the current guidance prices that were further trimmed by the NDRC on Thursday. "Encouraging price competition better reflects the supply and demand condition in the market," the NDRC said.

Thursday's price cut was the second in less than a month. A minimum interval has been set between two price adjustments, the NDRC said without specifying what it was.

"In the future, prices may be changed bi-monthly or monthly," said Han Xiaoping, senior analyst at energy consultancy Beijing Falcon Pioneer Technology Co.

Based on the new system, retail prices are formed on international crude oil prices, refining costs, taxes and reasonable profits, but the authority has not revealed details of the pricing formula it uses.


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