China raises retail prices of gasoline and diesel fuel

The pain at the pump can be felt in China too.

The government on Tuesday raised retail prices for gasoline and diesel fuel for the second time in less than six weeks in an attempt to keep pace with soaring crude oil prices.

Chinese motorists are now paying $4.43 a gallon for 90-octane fuel — nearly equal to the $4.45-a-gallon average for mid-grade fuel in California, according to AAA.

In contrast with the U.S., retail pump prices in China are set by central authorities, in part to maintain social stability.

China is the world’s second-largest consumer of oil, behind the United States. And it’s heavily dependent on foreign suppliers, importing more than half the 8.5 million barrels it consumed daily in 2009, according to the most recent statistics from the U.S. Energy Information Administration.

Inflation grew at its slowest pace in 20 months in February, giving Beijing the confidence to raise fuel prices without infuriating consumers, who were reeling last year from skyrocketing food costs, analysts said.


The increase should ease pressure on China’s two main refiners, the state-owned China Petroleum & Chemical Corp. and PetroChina Co., which are not allowed to pass costs on to consumers. The two have reported losing billions of dollars already because of soaring crude prices.

The government said retail gas prices would increase 6.5% and diesel 7%, the biggest increases since June 2009.

China, the world’s largest automobile market, last raised fuel prices Feb. 8, lifting gas 3% and diesel 4%.

Chinese policymakers determine pricing by measuring an array of global crude prices over a 22-day window. If those prices change by more than 4% in that time frame, domestic fuels costs have to be adjusted. Brent crude oil rose 11% in February.

Du Peixia, an energy analyst at Bohai Futures Co. in the eastern Chinese city of Dalian, said Chinese demand could remain robust despite the price increases. The nation has been importing record amounts of crude this year.

State subsidies for fuel will stay in place to protect grain, forestry and fishery producers as well as public transportation systems, according to China’s National Development and Reform Commission, the central government authority charged with determining gas and diesel prices.

“Short-term Chinese demand will depend on how many of these subsidies remain,” Du said. “In the long run, prices are only going to continue increasing because Chinese demand will keep going up.”

Gas prices in China have risen nearly 50% from 2009 and have almost tripled since 2000.

That hasn’t gone unnoticed by working-class Chinese.

Huang Wanjun, a driver for hire in Beijing, calculated that he’ll have to spend an additional $16 a week on gas because of Tuesday’s increase.

“Our income hasn’t increased, but everything else has, like food, housing and especially the price of gas,” said Huang, 32, who drives a 2009 Chevrolet four-door.

“I knew the price was going up as I watched the news, and it said that international oil prices were increasing,” he said, “but today, I was still shocked.”