China raised fuel prices by more than 3 percent Wednesday, the first increase in 10 months and bringing prices back to record highs, as higher global crude oil rates forced an adjustment.
Effective today, prices will rise by 300 yuan (US$47.5) a metric ton for both gasoline and diesel, according to the National Development and Reform Commission, which sets energy prices. That amounts to a 3.3 percent increase in average gasoline rates and a 3.65 percent rise for diesel.
At Shanghai pumps, the ceiling retail price for 93-octane gasoline is now 7.79 yuan per liter, up from 7.55 yuan; 97-octane gasoline is now 8.29 yuan from 8.03 yuan; and zero-grade diesel now costs 7.67 yuan, up from 7.42 yuan. Pump rates vary among regions across China.
The widely-expected increase came amid easing price pressure in the country. China's annual inflation fell to a 15-month low of 4.1 percent last December.
Inflation had been a source of concern for the government and forced it to postpone and cut the size of past price hikes.
The NDRC last adjusted prices in October when rates were cut by 300 yuan per ton. The last increase occurred in April. Higher fuel prices will hurt motorists, manufacturers and airlines but benefit state refiners Sinopec Corp and PetroChina Co.
According to industry consulting firm C1 Energy, the moving average of Brent, Dubai and Cinta crude, the three benchmarks on which the NDRC set domestic fuel prices, rose 4.2 percent over the past 22 working days as of Monday. A trigger point is 4 percent but the NDRC often considers other factors, including inflation and supply, when adjusting prices.
The escalating tension in Iran and a cold snap across Europe have kept crude strong in recent weeks. In London yesterday, the front-month Brent contract rose to as high as US$116.7 per barrel, the most expensive since early August.
The NDRC said it's still working to reform the current fuel pricing mechanism, unveiled in late 2008, to make it more transparent and predictable for refining margins at refiners, without giving details and a timetable. Analysts have said a new pricing formula may be cut to 10 working days from 22 now, and more benchmark crudes may be added for calculation.