Oil prices follow global market rises
China Wednesday raised the retail prices of gasoline to reflect the price hike on the international market.
The price-rise is likely to add further weight to inflation pressures on the economy, experts said.
The National Development Reform Commission Wednesday raised benchmark gasoline rates by 300 yuan (US$36.3) a ton, or 8 per cent, but kept prices of diesel unchanged.
In Beijing, retail gasoline prices rose to a four year high Wednesday. The benchmark 90-octane rose to 3.23 yuan (39.1 US cents) a litre from 2.99 yuan (36.2 US cents) a litre, while the 96-octane increased to 3.46 yuan (41.8 US cents) a litre from 3.20 yuan (38.7 US cents).
Experts said the price adjustment is to catch up with the international crude oil price hike. The US crude price has hit a 13-year high to above US$38 a barrel on worries about global supplies. Gasoline price in New York has also touched a 18-year high.
China pegged its domestic refined oil products to average rates in Rotterdam, New York and Singapore. Sinopec and PetroChina, the only two authorized oil companies to wholesale gasoline and diesel, are allowed to raise or drop their retail price by 8 per cent from the government-set benchmark.
Gong Jingshuang, an expert with Economic Research Centre with China National Petroleum Corp, said the demand of oil products will remain strong in the second quarter, despite the price increase.
"The seasonal demand rise in the second quarter will help keep the consumption at high," said Gong.
A thriving car market, rising investment in power, infrastructure and construction are boosting demands for oil products.
The rapid demand growth for oil products has forced Chinese refineries to run at top capacity in previous months, leading to a surge in crude oil import in the first two months this year.
The country, now the second largest oil consumer in the world, imported 10.5 million tons of crude oil in February, a 60.1 per cent year-on-year jump.
Qi Jingmei, an economist from the State Information Centre, said the oil price hike will pass the costs to millions of car users. It, in turn, will increase the prices in service industries.
"The oil price hike, along with price increases in grain, electricity, steel and coal, will add pressure on inflation," said Qi.
"But in the long run, the price increase is inevitable since the economy grows fast."