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New oil pricing mechanism urged in China

05-14-2012 14:22 BJT

A staff member changes price boards at the entrance of a gas station in southwest China's Chongqing Municipality, May 10, 2012. China lowered the per-tonne retail prices of gasoline and diesel by 330 yuan (52.38 U.S. dollars) and 310 yuan, respectively, on Thursday. The move, which marks the first cuts since October of last year, was made in response to lower crude prices on the global market. (Xinhua/Liu Chan)

By Tang Danlu

BEIJING, May 14 (Xinhuanet) -- Chinese price watchdog announced on Wednesday to cut gasoline and diesel prices for the first time since last October, which has fuelled mixed voices to reform current pricing mechanism for refined oil products.

Gasoline and diesel prices will be reduced by 330 yuan (52.38 U.S. dollars) and 310 yuan per ton respectively from Thursday, the National Development and Reform Commission (NDRC) said in a statement on its website.

The adjustments will lower the benchmark retail price of gasoline by 0.24 yuan per liter and diesel by 0.26 yuan per liter.

The move came in line with lower crude prices on the global market since late March. International crude prices kept dropping as a sluggish economic outlook for the eurozone and the United States triggered fears of decline in global oil demand.

The fuel price cut will lower domestic transportation costs, which will then help lower vegetable prices and ease inflation pressure, said Han Jingyuan, an industry analyst at www.315.com.cn, a commodity-related information provider.

However, the decision may not calm down the complaints from consumers for more price rises than cuts.

It has been an irreversible trend for domestic oil prices to gain more frequently than fall in line with international market changes, Han said.

According to media surveys in the Chinese first-tier cities, such as Shenzhen, Beijing and Shanghai, most of the local economic planning agencies have no plan to lower the taxi fuel surcharges, which was raised consecutively in recent years.

NDRC last changed the gasoline and diesel prices on March 20, raising them by 600 yuan per ton, which led to wide increase in prices of civil aviation oil and taxi fuel surcharges.

RISING PRICES POSSIBLE

If the "geopolitical crises" come to flatten, the global market will not see sharp declines, experts noted.

The crude price rises this year were mainly caused by the turbulent Middle East situations, including production halts in Libya and Iran's oil cuts over its tense nuclear issue.

"I think crude prices will not drop significantly in the following months. They will return to an acceptable level for both producers and consumers," said Wang Zhen, head of the Business Administration College of China University of Petroleum.

As the Iran nuclear crisis has not been resolved appropriately, the crude prices still might soar up for probably worsening situations, stressed Lin Boqiang, director of the China Center for Energy Economics Research at Xiamen University.


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