China’s latest fuel price rise triggers public debate

The 9 to 10% state-set price rise in gasoline and diesel as of June 30, the second in a month, forced the Chinese motorists to pay more than US$3 a gallon, compared to an average of US$2.69 a gallon in the United States last week. However Zhou Ruohong, chief analyst with the consultant branch of the China Petrochemical Corporation (Sinopec), the nation’s top refiner, told Xinhua Tuesday that the RMB600 (US$88.24 US dollars) per ton increase was still not enough, according to the current price change mechanism. Under the mechanism introduced in December, the National Development and Reform Commission (NDRC), the nation’s economic planning agency, may adjust fuel prices when crude prices change more than 4% over 22 straight working days. Yu Chunmei, analyst with the Shenyin and Wanguo Securities said the prices could increase RMB400 per ton at the end of July to prevent refiners losing money. Lin cited the increased fuel consumption tax in China, which is twice the average in the United States. Lin noted in China the costs of transportation and marketing takes up 20% of the retail prices, while that number for the United States is only 12%. (July 1, 2009)