China may not reduce its domestic price for refined oil products in the short term even though international crude oil prices have dived 20 percent in the last three months, according to experts with the state macro-economic control institution.
Having dropped for three consecutive months, international oil prices bounced back to US$60 per barrel after the nuclear test by the Democratic People's Republic of Korea (DPRK), said Zhang Jianping of the National Development and Reform Commission (NDRC).
Zhang said that the Chinese government has adopted a wait-and-see policy towards the unstable crude oil prices and will be very careful in making a decision on whether or not to reduce the domestic price for refined oil products.
Despite the rise in crude oil price over the past three years, China's NDRC, which regulates domestic prices for processed oil according to changes on the world market, has kept prices relatively low. However, this has also resulted in losses for producers and waste by consumers.
Zhang Guobao, Vice Minister of the NDRC, said at the 7th Sino-U.S. Petroleum and Natural Gas Forum last month that the domestic producers were still making losses at the current domestic gasoline price despite the drop in the international crude oil price.
Niu Li, an economist with the State Information Center, said if the international crude oil price continues to fall and remain at a lower level, the Chinese government should accelerate its pricing reform on processed oil to close the gap between domestic and overseas prices.
A move to lift the prices of processed oil, while setting up a mechanism to offer subsidies to disadvantaged communities and public service sectors, and levy special fees on oil producers who sell domestically produced crude oil over a certain level, was made last March.
China has raised the price of processed oil products seven times since last year and has only lowered them once.
(Xinhua News Agency October 12, 2006)