China will proceed with energy price reform in "a vigorous and steady way", says a white paper published on Wednesday by the Information Office of the State Council.
The paper, titled "China's Energy Conditions and Policies," says China will gradually establish a pricing mechanism that can "reflect resource scarcities, changes in market supply and demand, and environmental costs".
The paper says that the price mechanism "is the core of the market mechanism."
It says that China has driven electricity tariff reform to ensure that generation and selling prices are eventually established through market competition, with transmission and distribution charges supervised and controlled by the State.
China has also extended coal price reform to achieve full market pricing, the paper says.
The white paper says China has gradually improved oil and natural gas markets so that prices quickly reflect changes both in world markets and domestic supply and demand.
Faced with fuel shortages, China raised gasoline, diesel and jet fuel prices by nearly 10 percent in late 2007 to boost supplies but its wholesale gasoline prices are still below the international average.
This means the government must continue offering large subsidies to refineries to cover the losses they incur by selling oil at State-fixed prices.
Government subsidies to Sinopec, the nation's largest refinery company, reached US$1.2 billion in 2005 and US$640 million in 2006.