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China Lifts Prices of Oil Products to Help Refiners BUSINESS ASIA By Bloomberg

Posted on: Monday, 27 March 2006, 09:00 CST

By Janet Ong and Wing-Gar Cheng

China has raised prices of oil products for the first time in eight months, to help refiners cover costs after crude oil prices surged to record levels.

Starting Sunday, the price of gasoline leaving refineries was increased by 300 yuan, or $37, a metric ton, the National Development and Reform Commission, the nation's top economic planner, said on its Web site. Diesel prices were raised by 200 yuan a metric ton. The central government, which controls diesel and gasoline prices to limit their impact on inflation, is authorizing higher prices to help the nation's refiners cover rising oil costs. Oil reached a record of $70.85 a barrel on the New York Mercantile Exchange on Aug. 30 and has risen 17 percent over the past year. China's government last adjusted fuel prices on July 23.

"The wide pricing gap between international oil prices and domestic refined products is affecting market supply and steady development of the economy," the commission said. Prices of gasoline supplied to the government's reserves rose to 4,700 yuan a ton from 4,400 yuan, diesel prices to 4,070 yuan from 3,870 yuan, military- use kerosene to 4,090 yuan from 3,890 yuan, and aviation gasoline to 4,840 yuan from 4,530 yuan, the statement said.

The government also raised prices for jet fuel to between 4,840 yuan a ton and 5,470 yuan a ton, without providing comparative numbers, the statement said.

Companies like China National Petroleum and China Petrochemical, the nation's two biggest oil companies, are allowed to set retail prices of gasoline and diesel, as well as fuel supplied to commercial airlines and the transport sector, at 8 percent above or below the government's recommended prices, the commission said.

Oil companies will not be allowed to make the adjustments for retail prices of diesel sold to the fishery industry, it said.

In a separate statement, the commission said it would set up a subsidy system for selected industries including fishery, state- owned forestry companies and public transportation companies, to compensate for the price increase.

Farmers who grow grains will get subsidies to compensate for the impact caused by the higher cost of diesel oil and chemical fertilizer, the statement said, without stating the amount. City governments can offer subsidies to taxi drivers to help reduce the effect of the increase in fuel prices, it said.

To help refiners cover the higher costs of processing fuels to meet Euro III emission standards in Beijing, the recommended retail price of gasoline was raised by 460 yuan a ton, and diesel by 340 yuan a ton, compared with a gain of 250 yuan a ton for gasoline and 150 yuan a ton for diesel countrywide, the statement said. The Euro III standards are automobile emission restrictions that the European Union adopted in 2000 to regulate the amount of sulfur in gasoline and diesel.

Source: International Herald Tribune

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