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Analyst on effect of fuel price cut on transportion

07-12-2012 09:28 BJT

In response to falling international oil prices, China’s top economic policy maker, the National Development and Reform Commission cut petrol and gas prices for the third time in the space of two months. The change takes effect today. What does it mean for public and private transport? CCTV reporter Xie SiSi tells us more.

Ma Lianbo has been a taxi driver for almost 17 years. Fuel prices are always on his mind, every time he wants to hit the gas pedal.

He said, "Fuel prices are the main cost of my daily operation. We’re not like private car owners. For them, a full tank can maybe last a week, but for us, it can be used up in just two days. Basically I need to go to the petrol station every day.”

The NDRC’s latest move to lower the retail price of gasoline by 420 yuan a ton, and diesel by 400 yuan, is welcome news for Ma.

Ma said, “The cut in fuel prices means we spend less, so it’s a great thing for us(taxi drivers)."

But even with the price cut, the pressure is still high.

That’s why millions of taxi drivers like Ma who have been squeezed by high fuel prices, receive a government subsidy of around 300 yuan a month.

Analyst Chen Jiahe from Cinda securities elaborates on the effect on a broader scope.

He said, "Well I think it’s more important for the transportation that is used in the industry. For example the transportation used in transfer vegetables from rural areas to urban areas - that’s not a fixed price. But if you look at prices for buses or taxis, bus fare has been changed for tens of years, it won’t have a great effect of people’s feeling on transportation but it would bring the price cutting effect into the normal goods that you purchased."

It’s only been a month since the last time the country cut the price of crude oil. Analysts said the frequent decrease of fuel prices would add to China’s deflationary pressure, which has made the central government more comfortable in cutting benchmark interest rates and reforming energy prices.

Under a pricing system introduced in 2009, domestic fuel prices may be adjusted when international crude oil prices fluctuate by more than 4 percent over a period of 22 working days.

According to the NDRC website, the move was made in response to lower international crude prices and changes in the conditions of domestic and international economies, as well as the domestic refined oil market.

Chen said, " I think the most important reason is the international drop of oil prices. China’s mechanism has been criticized not tracking the international prices, but these(cut in price) have proven it’s tracking actually."

The NDRC says China will put forward a new fuel pricing scheme by the end of this year.

But it hasn’t given a clear schedule of the exact timing.

The department only says a good time would be a midpoint where international oil prices are at a reasonable level and can satisfy the cost of domestic fuel production.

Editor:Zhang Jingya |Source: CNTV.CN

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