China Raised Fuel Prices      

China raises the retail price of gasoline by RMB230 per ton and diesel by RMB220 per ton, effective October 26th. China's top economic planner, the National Development and Reform Commission (NDRC) said October 25th. After the adjustments, the benchmark gasoline price hits RMB7 420 per ton, while that for diesel stands at RMB6 680 per ton.
   The move is in line with the current oil products pricing mechanism at the start of 2009, the NDRC said. Domestic retail oil products prices are linked to international crude price, by adding refining costs, taxes, selling-process fees and a reasonable profit. The oil products prices could be adjusted when the internationally average crude prices change more than 4% over 22 consecutive working days. Since the end of September, the global crude price has climbed above 4%, at around US$80 per barrel. (CCR2009 No. 15)
   This was the second fuel price increase this year after the NDRC raised both gasoline and diesel prices by RMB320 per ton this April.
   Concerning anxieties about further inflation, NDRC explained that the fuel price hike is unlikely to push up inflation as oil products prices take up a small part of the CPI calculation. The government will give subsidies to low-income crowd to deal with the fuel price increase, and fuels used in government-managed departments like railways are not allowed to raise price.
   Many factors like the domestically growing demand for oil products since mid-September, overhaul of refineries and less production enthusiasm of refineries with the soaring global crude price led to thin profit. Some regions, such as Shandong, Anhui, Henan, Jiangxi, Hunan and Jilin provinces, experienced diesel shortages in the past two months as speculators bet on domestic price hikes after the global crude prices climbed.
   The NDRC also said that a new and more transparent pricing mechanism for oil products would be come out this year to prevent from speculation.
   Furthermore, the government will further improve the pricing mechanism of refined oil products to make it more flexible and better reflect changes between supply and demand.