Retail gasoline prices rise 8% in China

By Wang Ying (China Daily)
Updated: 2005-03-24 07:19

China's retail gasoline prices increased 8 per cent yesterday, the first rise since last August, in a bid to boost the oil refiners' profit margins, said industry sources.

The world's second-largest oil consumer after the United States increased mean retail gasoline prices by 300 yuan (US$36) a ton, but kept retail diesel prices unchanged at around 3,830 yuan (US$461).

Service stations can charge the final pump price within an 8 per cent range of the mean rates, far below the cost of motor fuel in most developed Asian countries. The new prices are still about one-third of pump prices in Singapore, according to a Reuters report.

Sources from the Beijing oil branch of Sinopec, Asia's largest oil refiner, said the retail 90-octane gasoline price in the capital city rose 0.25 yuan (3 US cents) per litre to 3.67 yuan (44 US cents) per litre. Price hikes for other types of retail gasoline also averaged 0.25 yuan (3 US cents) per litre.

Officials from the National Development and Reform Commission, said yesterday the government's decision not to change the diesel price was to protect the interests of end-users in the farming and construction sectors.

"It will be much easier for most of motorists to afford the price rise," said a Sinopec official.

"We had anticipated the price would increase - the current fuel price is acceptable, and we quite understand the oil refiners' situation," said Yang Pu, a motorist in Tianjin. "But of course, who doesn't want a low price?" he added.

Analysts said the gasoline price rise will help Sinopec and PetroChina - China's main finished oil dealers - increase their profit margins to a certain extent, but that will be moderate in the light of the current skyrocketing crude oil price on the international market.

"The 8 per cent rise is far from enough to relieve the pressure on oil refiners, burdened by the almost 40 per cent growth of the international crude price," said Zhang Jian, a petrochemical analyst with Beijing-based China Securities.

"We have long been waiting for the fuel oil price to increase, as we were struggling for the squeezed profits through paring down the production costs and saving energy consumption," said Wei Shifeng, a staff member from Sinopec's Cangzhou Oil Refiner in Hebei Province.

More than 10 oil refiners nationwide have failed to make profits for some time as the crude oil cost is too high, but the government-controlled fuel oil price remained unchanged, Shi told China Daily.

"The price hike will improve our situation to some extent," Wei added.

Commenting on whether prices could rise again in the near future, Gong Jingshuang, a senior expert with a consulting institute under the China National Petroleum Corp, told China Daily that it would depend on the crude oil price on the international market and the growth of the consumer price index in China.

"If international crude prices continue to soar, and the prices in other sectors such as agricultural products remains stable, the government may consider further increasing fuel oil price including diesel," Gong said.

CITIC's Zhang agreed with Gong, adding the retail gasoline price hike will be unlikely to slow China's robust demand for gasoline.

The International Energy Agency predicted China would need 500,000 barrels of oil per day in 2005, and 100,000 barrels of gasoline per day.

The government is making efforts to marketize the finished oil market to link it with the international market.

But in order to keep the national economy stable, the central government still controls finished oil prices including gasoline and diesel.

"If the time is ripe for the marketization of the finished oil market, for example to implement the fuel oil taxation to replace the current road maintenance fees, finished oil market will be a heated battlefield for oil dealers - especially after the end of next year when the wholesale finished oil market is fully opened," said Zhang.

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