New oil price reform veers nearer to market forces
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E-mail Xinhua, April 1, 2013
China's latest oil pricing reform brought the country one step closer to the full marketization of energy pricing and signaled the government's determination to veer toward a more market-oriented economy.
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The new system shortened the price adjustment cycle from 22 working days to 10 working days, canceled a 4-percent floating band for oil price changes and adjusted the varieties of crude used to calculate price changes for domestic oil products.
"Just a few days after the new cabinet took office, the government's quick action showed its determination to give full play to the role of the market," said Shi Dan, an expert with the financial strategy institute under the China Academy of Social Sciences.
Prior to the reform, domestic fuel prices were adjusted when prices for Brent, Dubai and Cinta crude changed by more than 4 percent over 22 working days.
The long adjustment cycle has been taken advantage of by distributors and consumers, who have profited by hoarding oil products when international oil prices register large rises and selling them after government price adjustments.
The new pricing rule is a giant step toward the marketization of domestic oil products, as it can reflect changes in international crude oil prices in a more timely manner than before, said Shi.
Bigger role for market
Due to its lack of a full-fledged market mechanism, the time has not come yet for China to fully marketize the pricing of resource products.
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