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Gasoline, diesel prices likely to go up again

By Xiao Wan (China Daily)
Updated: 2009-08-27 08:01

China may raise gasoline and diesel prices by 4 to 8 percent this week, to reflect international crude price hikes, said analysts.

This round of price hike is expected to be 300 yuan ($44) per ton, they said. Some expected the adjustment to be around 500 yuan per ton.

If that happens, this would be the sixth price adjustment this year. China has raised fuel prices three times and reduced them twice under a new pricing mechanism this year.

The latest price adjustment on July 29 put domestic gasoline and diesel prices at 6,510 yuan per ton and 5,770 yuan per ton respectively.

According to CBI China, a domestic information provider on commodities, the moving average of crude prices in Brent, Dubai and Cinta had gone up by around 10 percent from the last adjustment in July.

"Under a 22-day formula, there will undoubtedly be price increases on oil products this week," said Han Xiaoping, a veteran energy analyst in Beijing.

China adopted a new oil pricing system this year, under which domestic fuel prices would be adjusted when the moving average of a basket of international crude (Brent, Dubai and Cinta) changes more than 4 percent over a period of 22 working days.

Related readings:  Gasoline, diesel prices trimmed by 3%  China lowers gasoline, diesel prices  China raises gasoline, diesel prices  China raises gasoline, diesel benchmark prices

Global crude prices have surged to a 10-month high of nearly $75 per barrel this week. It has more than doubled from the beginning of this year.

Zhang Lianbi, analyst, Guangdong Oil and Gas Association, said as global crude prices may fluctuate around $70 per barrel for some time, the price adjustments on domestic oil products would accordingly "change by a small rate each time".

Analysts said Sinopec, the country's largest refiner will gain the most if the price spike is announced, as its profit margin largely depends on the volatility of international crude market.

Sinopec said on Sunday its net profit in the first half of 2009 rose by 332.8 percent year-on-year, due to adjusted refined oil prices on the domestic market.

Under international accounting rules, Sinopec's net profit stood at 33.25 billion yuan in the six-month period.

Domestic media reported that some executives from Sinopec said if domestic refined oil prices do not rise at the end of August, the company's refining sector would incur negative profits.

Analysts said currently Sinopec's refinery break-even price was near $60 a barrel. They said as an integrated oil giant, Petrochina has a much lower refinery break-even point than Sinopec.