China Raises Fuel Prices After Crude Climbs to 30-Month High
April 07, 2011, 4:35 AM EDTBy Bloomberg News
(Updates with refining margins in seventh paragraph.)
April 7 (Bloomberg) -- China raised retail fuel prices for the second time this year after oil’s advance to a 30-month high undermined the government’s efforts to cap costs and cool inflation in the world’s second-largest economy.
Prices rose by as much as 5.8 percent today, with gasoline increasing by 500 yuan ($76) a metric ton, or 0.37 yuan a liter, and diesel by 400 yuan, or 0.34 yuan a liter, the National Development and Reform Commission said in a statement yesterday.
Crude fell on concern higher prices will crimp demand in the world’s second-largest oil consumer, while shares of Chinese refiners gained. The fuel-price increase came two days after China raised interest rates for the fourth time since October to tame inflation that exceeded the government’s target.
“China has reluctantly raised domestic gasoline and diesel prices to record highs,” said Gordon Kwan, head of regional energy research at Mirae Asset Securities in Hong Kong. “The move is like pulling teeth with the government amid the anti- inflation campaign.”
China last increased fuel tariffs by as much as 4.6 percent on Feb. 20, based on a mechanism introduced in December 2008 that allows adjustments when crude costs change more than 4 percent over 22 working days. Consumer prices rose at an annual 4.9 percent pace in February, surpassing the government’s target of 4 percent for 2011.
China Petroleum & Chemical Corp., the country’s largest refiner, gained 1.5 percent to HK$8.14 in Hong Kong trading. Sinopec Shanghai Petrochemical Co. advanced 8.4 percent to HK$3.76. PetroChina Co. fell 0.7 percent to HK$12.14. The Hang Seng Index declined less than 0.1 percent.
Narrows Refining Losses
The fuel-price increase narrowed domestic gross refining losses to $2 a barrel from $10, the worst since October 2008, according to JPMorgan Chase & Co.
“Similar to the first hike, it does not fully compensate for higher crude prices,” JPMorgan’s Hong Kong-based oil analysts Brynjar Eirik Bustnes and Sophie Tan said in an e- mailed report.
Crude climbed to $108.83 a barrel in New York yesterday, the highest settlement since Sept. 22, 2008, on concern that conflict in Africa and the Middle East may curtail supplies. Global oil prices may remain high, the NDRC said.
“As much as the government wants to not raise prices, events in the Middle East have forced China into a corner,” Ben Simpfendorfer, publisher of China Insider and former chief economist at Royal Bank of Scotland Group Plc, said by mobile phone. “It’s a minor setback” in the fight against inflation.
Still Trails U.K.
While Chinese drivers started paying more at the pump than U.S. counterparts around December 2008, they still pay half the cost of drivers in Britain.
After today’s adjustment, gasoline in China will retail at $1.05 a liter on average, according to Bloomberg calculations based on prices set by the NDRC for the country’s provinces and regions. That compares with $2.17 a liter in the U.K. and 97 cents a liter in the U.S.
Crude has advanced 29 percent in New York since Feb. 15, when unrest in North Africa and the Middle East spread to Libya, formerly Africa’s third-biggest oil producer. Futures fell 0.1 percent to $108.73 a barrel in electronic trading at 4:05 p.m. Singapore time.
--Chua Baizhen, Winnie Zhu, Irene Shen, Wang Ying, John Duce. With reporting by Margot Habiby in Dallas. Editors: Ryan Woo, Jane Lee.
To contact the reporter on this story: Winnie Zhu in Shanghai at wzhu4@bloomberg.net
To contact the editor responsible for this story: Jane Lee at jalee@bloomberg.net.
