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Gasoline and diesel prices reduced from Friday

By Lan Lan (China Daily) Updated: 2012-11-16 10:21

Gasoline and diesel prices are cut for the fourth time this year from Friday to better reflect global oil prices, and experts predicted demand for diesel will pick up in the fourth quarter, fueled by the rebounding economy.

The National Development and Reform Commission, the country's top economic planning agency, announced the price reductions on Thursday, a day later than expected, as crude prices dropped close to the price adjustment threshold on Wednesday.

The price changes came after the country announced its newly elected top leadership.

Starting from Friday morning, retail gasoline prices are falling by 310 yuan ($49.7) a metric ton, or 0.22 yuan a liter, to be capped at 8,930 yuan per ton. Diesel dropped by 300 yuan a ton, or 0.26 yuan a liter, to 8,120 yuan per ton.

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Gasoline and diesel prices reduced from Friday

Affected by the sluggish economy, diesel fuel demand has been weak over the past few months, but is now expected to pick up quickly in the fourth quarter, said Niu Li, a senior economist with the State Information Center, a government think tank.

China's economic growth in the third quarter reached its lowest point in three years, but recent figures have suggested the economy could have bottomed out.

Those for railway investment, for example, showed negative 1.4 percent growth year-on-year in the first 10 months - but that was against a negative 41.8 percent performance in the first three months, indicating much higher demand for diesel fuel, mainly used in transportation and industrial production.

China's fixed-asset investment increased to 29.2 trillion yuan in the same 10-month period, a 20.7 percent rise from a year earlier.

The country's power consumption, too, grew 6.1 percent year-on-year in October, and mirrored similar increases in factory output, exports and auto sales, pointing toward general economic recovery.

Under the current Chinese pricing system, started in 2008, fuel prices may be adjusted when the average prices of Brent, Cinta and Dubai crudes move by more than 4 percent over 22 working days.

The 22-day moving average price of the three reference crudes had already passed 4 percent by Tuesday, according to Han Jingyuan, an analyst with JYD Online Co Ltd, a Beijing-based bulk commodity consultancy.

Apart from its slight delay this time, the government has strictly followed the mechanism in recent months, said Niu.

The price cuts will also help the country ease inflation, despite it being considered relatively low in recent months.

Global crude prices have declined to between $85 and $90 a barrel recently, owing to bleak global economic prospects in the United States and the eurozone.

Recently announced Q3 economic data from the US were better, but worries about a potential "fiscal cliff", referring to a series of upcoming government cost cuts and tax increases, continue to generate uncertainty in the market.

Also, large amounts of liquidity may enter the commodity market as a result of a new round of monetary easing in some countries, sparking further fluctuations.

China has already raised fuel prices four times and cut prices four times this year.

The latest adjustment in September saw the country raise the price of gasoline by 550 yuan per ton and diesel by 540 yuan per ton.

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