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Gasoline Price Cut Gets Lukewarm Consumer Response
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Chinese motorists have given the government's announcement of a cut in fuel price a lukewarm response, complaining it is too little.


"The price cut is good news to me, but the price did not drop as much as I had expected," said a taxi driver in Beijing, who declined to give his name.


The government announced on Sunday that it would lower prices by 220 yuan (US$28) per ton. In Beijing, the market price of 93 octane petrol immediately dropped from 5.09 yuan a liter to 4.90 yuan.


The taxi driver with the Beijing Xiaohai Taxi Company said his taxi consumed 25 liters a day and a 0.19 yuan per liter price cut would save less than 10 yuan every two days.


"Every time the price is lifted, it goes up by about 0.40 yuan per liter, but when the price is cut, the decrease is less than half of the increase," he complained.


As international oil prices have soared, the government has raised petrol prices 12 times since 2003, including twice in 2006.


The last price cut was in May 2005.


Another taxi driver named Ji complained the international crude oil price had dropped by 21.21 percent from US$66 to 52 per barrel, while the domestic price of 93 octane petrol only dropped by a slight 3.73 percent.


"The price cut is negligible in reducing the cost of driving," Ji said.


A survey by sina.com showed that about 90 percent of those polled were not satisfied with the price cut because it was too small.


"Although international prices have dropped noticeably, we can not simply expect that China should drop its prices immediately by a big margin," said Cha Daojiong, head of the International Energy Resources Strategy Research Center of the People's University of China.


Factors such as the cost of production, transportation and refining should be taken into consideration in setting the price, Cha said.


The government has endeavored to map out a pricing system for refined oil that takes account of conditions in China, but fluctuating international prices have made this difficult.


World crude oil prices have dropped since September. New York Mercantile Exchange (NYMEX) prices for February delivery of light, sweet crude stood at US$51.88 per barrel on Thursday, the lowest price since May 2005.


Lower international prices have seen domestic consumers calling for price cuts, and proposals from experts for a pricing mechanism that will link domestic refined oil prices more closely with international levels.


However, the domestic price regulator, the National Development and Reform Commission, has kept refined oil prices low compared with international levels, even when prices on the international market rose.


"It's not an easy thing to raise the oil price, and it's not easy to cut it either," said a source with the Beijing company of the China Petroleum and Chemical Corporation (Sinopec).


"Our price is already lower than elsewhere in the world, if the price is lowered further, we would sustain losses in business," said the source.


In December 2006, the domestic price of gasoline was 5,200 yuan(US$667) per ton and diesel 4,570 yuan per ton, while in Singapore prices were 5,509 yuan and 5,352 yuan respectively, said Jiang Jiemin, general manager of the China National Petroleum Corporation (CNPC).


Experts said that even if the international prices continued to drop, there was little room for cuts in domestic prices as domestic oil companies looked to sustaining their profits.


Nevertheless, the price cut was still applauded by some.


Mr. Cheng, from south China's Guangdong Province, had abandoned driving his car due to constant oil price hikes.


With the lower price, Cheng said he planned to resume driving his car.


Experts said cutting domestic refined oil prices may create the opportunity to levy a fuel oil tax, which was first proposed in 1994 and has been delayed out of fear that it would impose too heavy a burden on those who consume most, such as taxi drivers.


(Xinhua News Agency January 16, 2007)


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