China Raises Gasoline and Diesel Prices

BEIJING – China’s government on Wednesday raised state-set gasoline and diesel prices by about 10 percent in response to soaring world oil prices.

It was the second time this year that the communist government has raised fuel prices.

But prices at the pump are still much lower than in the United States or other countries, at about 4.20 yuan (52 cents) per liter, or about $2.10 a gallon.

China’s main planning agency, the State Development and Reform Commission, imposed the hike because "current prices of processed oil are far below that on the international market, which is not helpful to oil refineries in China and to ensure adequate supplies," the official Xinhua News Agency said.

But the government has resisted appeals by economists to let the market set prices, afraid that a big jump would ignite inflation and cause social unrest.

China is one of the world’s top three oil consumers, along with the United States and Japan. But the government has tried to insulate the economy from soaring prices by requiring Chinese oil companies to absorb much of the increase.

China met its oil needs from domestic wells until the late 1990s but imports have soared since then amid booming economic growth.

Economists say price controls encourage wasteful use of imported oil at a time when Chinese leaders are calling for conservation in order to limit dependence on exports.

Price caps have caused heavy losses for refiners, discouraging them from investing in new refining and distribution networks. That has led to gas and diesel shortages in scattered areas.

After the latest increase, local authorities were told to take steps to "ensure the income" of taxi drivers, who will be hit hard by higher prices, Xinhua said.