China Considering Faster Response to Crude Costs for Fuel PricesBloomberg News
China is considering ways to respond faster to changes in international crude costs when setting domestic gasoline and diesel prices, the chairman of the nation’s top economic planner said.
Under the current pricing mechanism, which measures the change in the 22-day moving average cost of a basket of crude grades, the adjustment period is too long and the 4 percent threshold for revisions is too high, Zhang Ping, the chairman of the National Development and Reform Commission, said at a press conference in Beijing today.
China plans to use more market-based price systems to improve energy efficiency and curb losses at state-owned oil companies such as China Petroleum & Chemical Corp., or Sinopec, and PetroChina Co. The nation will reduce energy use per unit of gross domestic product by at least 3.7 percent this year under targets announced by the NDRC yesterday. PetroChina’s crude-processing operations lost 30 billion yuan ($4.8 billion) in the first nine months of 2012, the company said Oct. 30.
“The new pricing regime will ensure profitability for both PetroChina and Sinopec’s refining divisions, while passing on higher energy costs to consumers to encourage them not to waste fuel,” Gordon Kwan, the head of energy research at Mirae Asset Securities Ltd. in Hong Kong, said by e-mail today. “Higher fuel costs should slow China’s GDP growth from 7.8 percent last year to the target of 7.5 percent this year.”
The NDRC tracks international crude costs via a basket of Brent, Dubai and Indonesia’s Cinta grades. It increased fuel prices last month for the first time since September, boosting gasoline by 300 yuan a metric ton and diesel by 290 yuan a ton.
Modifications to the mechanism will be aimed at making fuel-price adjustments more timely, and the government is expected to set a minimum and maximum level for changes, Liao Kaishun, an analyst with ICIS C1 Energy, said by phone from Guangzhou.
— With assistance by Jing Yang, and Zhe Huang