Gasoline and diesel will be cheaper from today, and the country's top economic planner could cut retail fuel prices more frequently to take them closer to global market levels.
The National Development and Reform Commission (NDRC) Wednesday announced cuts in gasoline and diesel prices by 140 yuan ($20.5) and 160 yuan a ton, or by 2 and 3.2 percent, respectively.
But it did not say whether the cuts were for the factory gate price or retail market. Nor did it specify how the cuts would affect the range of prices for various grades of fuel or in different parts of the country.
Top quality gasoline in Beijing cost 5.80 yuan Wednesday. "The cut will bring down the price of retail gasoline by a little more than 0.1 yuan a liter," said Niu Li, senior economist with the State Information Center, a government think tank.
"This round of price cut is aimed at revamping the country's fuel pricing system to take it closer to global levels," Niu said. "The government may do it (cut) more often" to achieve that goal.
The NDRC cut retail fuel prices by as much as 18 percent on December 19, the first time in almost two years. But some people complained that the prices were still much higher than in many other countries.
The benchmark crude oil price on the New York Mercantile Exchange traded at $38.84 a barrel Wednesday, 73 percent below its July peak of $147.27 because of the global slowdown.
Niu said the cuts would not have a serious impact on the country's two largest refiners, China Petroleum & Chemical Corp and PetroChina Co. Instead, they would boost their sales.
"Right now, the domestic demand for fuel is rather weak, and the price cut will help raise it. So it should be good news for them," he said.
Falling oil demand has already sparked a price war among retail companies in many parts of the country.
In Zhejiang province and Shanghai city, the retail price of gasoline has been cut to as low as 4.70 yuan a liter, about 13 percent lower than in Beijing. And in suburban Beijing, several filling stations have cut prices under the disguise of sales promotion.