Dec. 19 (Bloomberg) -- China, the world’s second-biggest oil user, will increase the fuel-oil consumption tax paid by refiners and importers by eightfold to conserve energy use.

The tax will be raised to 0.8 yuan (12 cents) a liter from 0.1 yuan starting next year, according to a statement on the government’s Web site today.

Crude oil has plunged 75 percent from July’s record, easing import costs and giving China room to implement energy-tax reforms first proposed about 10 years ago. The government is increasing consumption taxes on petroleum products such as fuel oil to spur energy-saving, cut pollution in cities and reduce oil imports.

“The consumption tax increase will hurt demand further amid an economic slowdown,” Bizer Tang, chief analyst at Guangzhou Twinace Petroleum & Chemical Corp, the nation’s largest private fuel-oil importer, said today from the capital city of Guangdong province. Guangdong is the biggest energy user among provinces in China.

The fuel-oil consumption tax increase will largely offset the import tariff cut announced yesterday. China will reduce the fuel-oil import levy to 1 percent from 3 percent starting 2009, the Finance Ministry said then. Import tariff cut will save users about 50 yuan a ton while the consumption tax increase will boost costs by about 800 yuan a ton, according to Tang.

Falling Purchases

China’s fuel-oil imports fell 15 percent to 22.5 million tons last year on increased costs.

The levy on naphtha, solvents and lubricants will increase to 1 yuan a liter from 0.2 yuan, according to today’s statement.

The tax bracket for unleaded petrol will be raised to 1 yuan per liter, from 0.2 yuan while the levy on leaded gasoline will be raised to 1.40 yuan per liter from 0.28 yuan.

China Petroleum & Chemical Corp. and PetroChina Co., the nation’s two largest refiners, are the country’s biggest importers of fuel.

Fuel oil is mainly used in power generators and ships. It is also used by China’s small, privately run refineries, mostly in the southern manufacturing hub of Guangdong, as a raw material to make gasoline and diesel.

The government said earlier this month that the gasoline consumption tax will rise to 1 yuan a liter from 0.2 yuan and the levy on diesel will climb to 0.8 yuan a liter from 0.1 yuan.

China is cutting fuel prices by as much as 32% for the first time in almost two years as crude oil prices slumped.

To contact the reporter on this story: Winnie Zhu in Shanghai at wzhu4@bloomberg.net

Last Updated: December 19, 2008 06:00 EST