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Making sense out of rising fuel prices
Source: Xinhua |
July 3, 2009, Friday
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Print Edition
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CHINA'S latest fuel price hike, which is intended to reflect rising international crude costs, sparked widespread debate as consumers grumbled that the record domestic prices were even higher than those in the United States, the world's biggest oil consumer.
The 9-10 percent state-set price rise in gasoline and diesel as of June 30, the second in a month, forced Chinese motorists to pay more than US$3 a gallon, compared with an average of US$2.69 a gallon in the US last week.
According to a survey by the Chinese Web portal sina.com, 94.3 percent of over 260,000 respondents thought fuel prices are too high now.
"We have to pay one-eighth more than the US consumers, but we earn only one-fifth of their income. It is really confusing," said a Netizen from Guangdong Province.
"Why is it so easy to see a domestic price rise when international prices rally, but so hard to see a price cut when global prices fall?" asked a Netizen from Sichuan Province.
Zhou Ruohong, chief analyst with the consultant branch of the China Petrochemical Corp, the nation's top refiner, told Xinhua Tuesday that the 600 yuan (US$88.24) per ton increase was still not enough, according to the current price-change mechanism.
Under the mechanism introduced in December, the National Development and Reform Commission (NDRC), the nation's economic planning agency, may adjust fuel prices when crude prices change more than 4 percent over 22 consecutive working days.
In the 22 working days through June 30, crude futures at the Brent, Cinta and Dubai markets averaged at around US$68 a barrel, up 19 percent from the previous calculation period, said Niu Li, a senior researcher at the State Information Center who collects this data.
By the current rules, the domestic prices should rise 1,000 yuan per ton at least. Refiners still face cost pressure, said Zhou.
Sinopec said on May 22 that it will lose money turning oil into fuel if the international crude prices rise above US$60 per barrel and the Chinese government holds down domestic retail prices.
China's producer price index (PPI), the inflation gauge at the wholesale level, fell for four consecutive months in May, which gives the Chinese government room to raise prices.
Yu Chunmei, an analyst with Shenyin and Wanguo Securities, said the prices could increase 400 yuan per ton at the end of July to prevent refiners losing money.
She predicted the domestic price will change frequently in the future as international prices fluctuate.
Different view
As consumers questioned the widening gap with the US fuel prices, experts held a different view.
"Fuel prices between the two nations are incomparable because of their different composition," said Lin Boqiang, director of the China Center for Energy Economics Research at Xiamen University.
According to the new rules, fuel prices take into account crude prices, taxes and a profit margin for refiners.
Lin cited the increased fuel consumption tax in China, which is twice the average in the United States.
On January 1, China raised the gasoline consumption tax from the previous 0.2 yuan per liter to one yuan per liter and the diesel consumption tax from 0.1 yuan per liter to 0.8 yuan per liter.
It also annulled six types of fees on road maintenance and management, so that enable drivers to pay less if they drive less.
Lin noted that the costs of transport and marketing takesup 20 percent of the retail prices in China, while that number for the US is only 12 percent.
"The cost gap could be 0.8-1.0 yuan per ton," he said. He also attributed the gap to higher refining costs in China.
China's domestic fuel prices have long been lower than international prices as the government capped prices to prevent increasing costs passing to end users.
Netizens' complaints reflect a "misunderstanding," said Xu Kunlin, deputy head of the pricing department of the NDRC, in an interview with Xinhua.
He said since the new rules took effect, gasoline prices were cut by 1,140 yuan per ton and boosted by 290 yuan per tonne. Diesel prices were cut by 1,260 yuan per ton and raised by 180 yuan per ton.
Lin Boqiang noted if China wants to reflect international prices, the domestic prices will be higher than the US prices because of higher tax.
High fuel use tax and the retail price rise will help curb oil consumption amid the mounting oil use in China, said Niu Li.
According to Sina's survey, 90 percent of the respondents said they will drive less because of the high fuel prices.
The 9-10 percent state-set price rise in gasoline and diesel as of June 30, the second in a month, forced Chinese motorists to pay more than US$3 a gallon, compared with an average of US$2.69 a gallon in the US last week.
According to a survey by the Chinese Web portal sina.com, 94.3 percent of over 260,000 respondents thought fuel prices are too high now.
"We have to pay one-eighth more than the US consumers, but we earn only one-fifth of their income. It is really confusing," said a Netizen from Guangdong Province.
"Why is it so easy to see a domestic price rise when international prices rally, but so hard to see a price cut when global prices fall?" asked a Netizen from Sichuan Province.
Zhou Ruohong, chief analyst with the consultant branch of the China Petrochemical Corp, the nation's top refiner, told Xinhua Tuesday that the 600 yuan (US$88.24) per ton increase was still not enough, according to the current price-change mechanism.
Under the mechanism introduced in December, the National Development and Reform Commission (NDRC), the nation's economic planning agency, may adjust fuel prices when crude prices change more than 4 percent over 22 consecutive working days.
In the 22 working days through June 30, crude futures at the Brent, Cinta and Dubai markets averaged at around US$68 a barrel, up 19 percent from the previous calculation period, said Niu Li, a senior researcher at the State Information Center who collects this data.
By the current rules, the domestic prices should rise 1,000 yuan per ton at least. Refiners still face cost pressure, said Zhou.
Sinopec said on May 22 that it will lose money turning oil into fuel if the international crude prices rise above US$60 per barrel and the Chinese government holds down domestic retail prices.
China's producer price index (PPI), the inflation gauge at the wholesale level, fell for four consecutive months in May, which gives the Chinese government room to raise prices.
Yu Chunmei, an analyst with Shenyin and Wanguo Securities, said the prices could increase 400 yuan per ton at the end of July to prevent refiners losing money.
She predicted the domestic price will change frequently in the future as international prices fluctuate.
Different view
As consumers questioned the widening gap with the US fuel prices, experts held a different view.
"Fuel prices between the two nations are incomparable because of their different composition," said Lin Boqiang, director of the China Center for Energy Economics Research at Xiamen University.
According to the new rules, fuel prices take into account crude prices, taxes and a profit margin for refiners.
Lin cited the increased fuel consumption tax in China, which is twice the average in the United States.
On January 1, China raised the gasoline consumption tax from the previous 0.2 yuan per liter to one yuan per liter and the diesel consumption tax from 0.1 yuan per liter to 0.8 yuan per liter.
It also annulled six types of fees on road maintenance and management, so that enable drivers to pay less if they drive less.
Lin noted that the costs of transport and marketing takesup 20 percent of the retail prices in China, while that number for the US is only 12 percent.
"The cost gap could be 0.8-1.0 yuan per ton," he said. He also attributed the gap to higher refining costs in China.
China's domestic fuel prices have long been lower than international prices as the government capped prices to prevent increasing costs passing to end users.
Netizens' complaints reflect a "misunderstanding," said Xu Kunlin, deputy head of the pricing department of the NDRC, in an interview with Xinhua.
He said since the new rules took effect, gasoline prices were cut by 1,140 yuan per ton and boosted by 290 yuan per tonne. Diesel prices were cut by 1,260 yuan per ton and raised by 180 yuan per ton.
Lin Boqiang noted if China wants to reflect international prices, the domestic prices will be higher than the US prices because of higher tax.
High fuel use tax and the retail price rise will help curb oil consumption amid the mounting oil use in China, said Niu Li.
According to Sina's survey, 90 percent of the respondents said they will drive less because of the high fuel prices.
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