OPINION> EDITORIALS
|
OPINION> EDITORIALS
|
|
Credible signals
(China Daily)
Updated: 2009-07-01 07:52 The second price hike within a month has added credibility to China's new fuel pricing mechanism. This marks a beginning towards making market-based price signals a powerful measure for energy conservation. After a small hike on June 1, the National Development and Reform Commission yesterday promptly raised the pump prices of gasoline and diesel prices to record levels though international crude prices stand at only half of the peak price of $147 a barrel reached last year. The latest price hike must have caught most Chinese car owners by surprise though it should have been anticipated after the new pricing mechanism was announced on May 8. Under the new price-setting formula, domestic fuel prices are subject to adjustment when international crude price rises or falls by a daily average of 4 percent over 22 working days in a row.
Though international oil prices have risen by a little more than 4 percent since the last price hike, few believed that Chinese policymakers would respond so rapidly and so aggressively to the recent oil price fluctuations in the international market. On the one hand, the price hike at the beginning of June looked like merely a belated reaction to the surge in world oil prices, which have doubled from the February lows near $30 a barrel. The previous, small hike in domestic retail prices in late March clearly did not reflect the change in international oil prices. On the other hand, the pent-up sales of new cars in the country, though largely attributed to a sweeping tax cut early this year, is widely deemed as a key source of consumption growth. It was felt that policymakers would rather court this uptrend rather than curb it with higher oil prices. However, such assumptions have proved wrong with the prices of gasoline and diesel being raised by nearly 9 percent and 10 percent respectively yesterday. This is encouraging because it highlights the government's commitment to a more flexible pricing system that can effectively adjust supply and demand with credible price signals. More important, it shows that while being keen to revive economic growth, Chinese policymakers do not favor a fuel binge caused by low pump prices. If international oil prices go up further, the new pricing mechanism will allow the Chinese authorities to impress on people the urgency of energy conservation by quickly raising pump prices further. That will not only be good for China to address the current slight consumer deflation but also push for better energy efficiency to sustain the country's long-term growth. (China Daily 07/01/2009 page8) |
