Chinese fuel price hike hurts drivers, but impact on economy “limited”

China’s latest fuel price hike from Tuesday would certainly pinch the pockets of consumers, but may not leave a lasting impact on the nation’s economic recovery, analysts said. Gasoline, diesel and jet fuel prices in the country were raised by as much as 11%, the third increase this year and the second in June, to reflect recent price changes in the global oil market. For many like the 24-year-old fashion writer He Yi, it is time to tighten their purse strings, Wednesday’s China Daily reported. China’s retail fuel prices are controlled by the government under a mechanism introduced in December that takes into account of crude prices, taxes and a profit margin for refiners. Crude oil futures have risen 60% to more than 70 dollars a barrel this year from a July record on signs of a global recovery. However, economists and analysts believe this round of price hike will not have any direct and obvious impact on the Chinese economy, which is largely fuelled by coal. “As China only needs oil to supply 20% of its energy consumption, costlier oil will not make things as bad as costlier coal,” said Lin Boqiang, director of the China Centre for Energy Economics Research at Xiamen University. (July 1, 2009)