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Impact of Beijing oil price rise limited
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Beijing raised gasoline and diesel prices by up to 4 percent to make up for the higher cost of cleaner fuel, but an analyst said such a regional move would have limited impact on the earnings of China's two refining giants.

The rise, effective yesterday, is to help cover the cost of the costlier but cleaner Euro IV standard fuel, which was introduced to the Olympic host city at the start of this year, according to a notice on the Website of the Beijing Municipal Commission of Development and Reform.

Retail benchmark prices for gasoline jumped 200 yuan (US$29) a ton, or more than 2 percent, while diesel rose 290 yuan a ton, around 4 percent.

At Beijing's pump stations, prices were raised to as much as 6.37 yuan a liter from 6.20 yuan for the 93-octane gas, and to 6.78 yuan from 6.60 yuan for the 97-octane.

"As the move is confined to Beijing and Euro IV (fuel), and the hike is not significant, we don't see too big an impact on PetroChina Co and Sinopec Corp, and we would maintain previous earnings forecast on them," CITIC Securities analyst Yin Xiaodong said.

Beijing consumes around 6 million tons of gasoline and diesel that meet Euro IV a year, accounting for only a small proportion of national fuel output, which amounted to 130 million tons in the first eight months of the year, Yin said.

Sinopec and PetroChina contribute over 85 percent of domestic fuel output.

The capital is the only city on the Chinese mainland supplied by fuels meeting the Euro IV emission standards, so the latest increase, which came on top of a substantial nationwide hike of up to 18 percent in June, is a logical move.

There were no changes to the prices in other Chinese cities this time.

That said, a nationwide price rise won't come in the near term and is also not necessary against the backdrop of weaker crude prices, said Niu Li, an economist at the State Information Center.

(Shanghai Daily October 8, 2008)

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