Policymakers working to determine when to close the gap between
the comparatively lower prices of refined oil products in China and
those on the international market have been struggling with the
record-setting global price.
At the beginning of January, oil was selling for $100 a
When it rose to $90 a barrel, a spokesman for the National
Development and Reform Commission (NDRC) said the ministry-level
body was in a "difficult situation" reforming the country's energy
and resources pricing system.
The price of crude oil in China is set by the global market, but
the refined price is still regulated by the government.
"The timing is not good because China is already in a
high-inflation cycle," an NDRC spokesman said, adding that curbing
inflation is a priority this year.
Analysts said it is unlikely that the government will raise the
prices of refined oil products. They said the central government
will continue to subsidize refiners, which have run at a loss for
years due to higher import costs.
Lin Boqing, director of the China Center for Energy Economics
Research at Xiamen University, said energy pricing reform,
especially for refined oil products, should continue and that the
government has said repeatedly "it is necessary to reform the
pricing mechanism of resource products to improve efficiency".
"But reform should be carried out at the right time, with due
consideration for all concerned," Lin said.
He said low energy prices had increased the competitiveness of
high-energy-consuming, high-polluting and resource-based
industries, enlarged trade surpluses and exacerbated yuan
The authorities have raised the refined oil price four times
since 2006. The current average price is about $65 a barrel. The
global crude price skyrocketed from $70 a barrel in July last year
to $100 a barrel at the beginning of January.
Some refiners have stopped production due to the high costs they
must bear, which has led to supply shortages in coastal areas. In
response, the government has urged China National Petroleum Corp
and China Petrochemical Corp, the nation's two largest oil
producers, to go all out to ensure fuel supplies.
Fuel shortages eased after prices began climbing last November,
but many regions still face tight diesel supplies. The NDRC raised
the prices of gasoline, diesel oil and aviation kerosene by 500
yuan (about $69) per ton, representing an increase of 8 percent.
The average retail price of gasoline is now 5,980 yuan per ton, and
diesel is 5,520 yuan per ton.
China scored new highs both in oil output and consumption in
2007, boosted by the robust momentum of its economic growth.
Sources with the China Petroleum and Chemical Industry Association
said recently that China had produced 186.7 million tons of crude
oil in 2007, up 1.6 percent from 2006.
The output represented a record high, though the growth was
slow, Deng Xianrong, a researcher at the State Council's
Development Research Center, said.
The country's net imports of crude oil climbed to 159.28 million
tons last year, up 14.7 percent. Consumption of crude oil, or the
sum of net imports plus output, rose 7.3 percent to 346 million
tons in 2007. That means that some 46.05 percent of the county's
crude oil consumption is met by imports.
The sizzling economy, large influxes of investment in heavy
industry and the many cars crowding city streets have driven up
China's demand for oil. The country's GDP grew by 11.4 percent last
year, the fastest rate in the past 13 years, with the industrial
added value rising 18.5 percent from a year ago.
The diesel shortage that hit the country in the second half of
last year led to a sharp rises in diesel imports. China imported
1.62 million tons of diesel in 2007, up 130.1 percent year-on-year,
with the volume of diesel exports dropping 14.9 percent to 660,000
(China Daily February 11, 2008)