Bloomberg News

China Raises Diesel, Gasoline Prices on Crude Oil

April 13, 2010

China, the world’s second-largest energy user, raised gasoline and diesel prices by as much as 4.6 percent after global crude costs climbed, according to a government statement.

Retail gasoline and diesel prices will increase by 320 yuan ($47) a metric ton, the National Development and Reform Commission said on its Web site today. The NDRC said the fuel price gain will add 7 basis points to the April consumer price index month-on-month.

An increase will add to costs for manufacturers and farmers and may add to inflationary risk as the Chinese economy, the world’s third biggest, expanded at the fastest pace since 2007 in the fourth quarter. China Petroleum & Chemical Corp. (386), the nation’s biggest refiner, will benefit from any potential adjustment after crude oil costs climbed almost 6 percent since November, when the government last raised prices.

Refiners need an increase of between 400 and 500 yuan per ton to cover gains in crude oil costs, Brynjar Eirik Bustnes, an analyst at JPMorgan Chase & Co., said by telephone in Hong Kong. A revision lower than 400 yuan wouldn’t have a “meaningful impact” on inflation, he said before the announcement was made.

Consumer Prices

Diesel prices in western Xinjiang province will be set at a maximum of 7,330 yuan a ton, a 4.6 percent increase. The price of 90-octane gasoline in Beijing, was fixed at 8,620 yuan a ton (93 cents a liter) and diesel at 7,950 yuan a ton. Pump prices for regular gasoline in the U.S. are about 75 cents a liter, according to data from the Energy Information Administration. Jet fuel prices were raised to 5,690 yuan a ton.

The change comes amid speculation that China will allow the yuan to appreciate by June 30 to help curb inflation. China’s consumer prices rose 2.7 percent in February from a year earlier, the biggest gain in 16 months.

Benchmark crude oil futures in New York have risen about 68 percent in the last 12 months.

China Petroleum, also known as Sinopec, said last month the profit from turning crude into fuels was “very low” in the fourth quarter and may have fallen further between January and March. The refiner imports about 80 percent of its crude oil requirements.

China has adjusted prices eight times last year, excluding the potential increase, after a mechanism was introduced in December 2008 that allows the government to revise prices when crude-oil costs change more than 4 percent over 22 working days.

The government controls fuel prices to keep inflation in check. Prices were adjusted twice in 2008 before the pricing mechanism came into effect.

To contact the reporter on this story: Baizhen Chua in Beijing at bchua14@bloomberg.net

To contact the editor responsible for this story: Clyde Russell at crussell7@bloomberg.net


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