May 8 (Bloomberg) -- Chinese refineries, which rely on imports to meet more than half of their crude-oil needs, will have “normal” profits when crude trades below $80 a barrel, said the nation’s top economic planning agency.

The government will consider subsidizing refiners to guarantee fuel supplies when crude oil exceeds $130 a barrel, the National Development and Reform Commission said on its Web site today. China will likely “freeze” fuel prices should crude surpass that level, the commission said in an outline of its fuel-pricing mechanism introduced in December.

The refining profits of Chinese oil companies more than doubled in the first quarter from a year earlier, Feng Shiliang, deputy general secretary at the China Petroleum and Chemical Industry Association, said April 24. Margins will be “reduced” when crude is between $80 and $130, the commission said today.

“The details of the mechanism are no surprise to the market,” Wang Aochao, the Shanghai-based head of China Energy Research at UOB Kay Hian Ltd., said by telephone. “Essentially, Chinese oil refiners’ profits will be ensured when oil costs less than $130.”

PetroChina Co., the country’s largest oil company, rose 4.1 percent to HK$8.31 in Hong Kong today, while China Petroleum & Chemical Corp. gained 1.1 percent to HK$6.34. The benchmark Hang Seng Index climbed 1 percent.

Crude oil for June delivery was at $57.73 a barrel in electronic trading on the New York Mercantile Exchange at 5:40 p.m. Singapore time.

Cost of Crude

China may adjust fuel prices when crude-oil costs change more than 4 percent over 22 consecutive working days, the commission said today. Domestic fuel prices are linked to the prices of Brent, Dubai and Cinta crude oil under the new mechanism, PetroChina said on May 6.

The government raised fuel prices by as much as 5 percent on March 25. Gasoline and diesel are used to power trucks, cars and small generators in China.

The mechanism is “temporary,” and domestic fuel prices will be market-determined in the long run, according to the commission today.

The government is also keeping the trigger level for the crude windfall tax levied on oil producers at $40 a barrel, the commission said in another statement today. The tax rate ranges from 20 percent to 40 percent, the economic planner said.

Oil producers have been paying a tax on revenue from crude sold above $40 a barrel under a levy introduced in March 2006.

The windfall tax will “suffocate” the investments of Chinese oil companies, and in the long term, domestic production growth, Gordon Kwan, an energy analyst at Mirae Asset Securities in Hong Kong, said in e-mailed comments. China will become more reliant on oil imports as a result, Kwan said.

To contact the reporter on this story: Eugene Tang in Beijing at eugenetang@bloomberg.net

Last Updated: May 8, 2009 06:10 EDT