China to raise gasoline, diesel prices from Friday

BEIJING -- China will raise the retail prices of gasoline by 390 yuan ($62) per ton and diesel by 370 yuan per tonne starting Friday, the country's top economic planner said Thursday.

The move, which followed three consecutive cuts from May to July, marks the third such increase this year, due to a rebound in international crude oil prices.

The benchmark retail price of gasoline will be lifted by 0.29 yuan per liter and diesel by 0.32 yuan per liter, the National Development and Reform Commission (NDRC) said in a statement on its website.

Under China's oil product pricing system introduced in 2009, domestic fuel prices may be adjusted when international crude oil prices change by more than 4 percent over 22 working days.

The NDRC last cut the retail prices of gas and diesel on July 11. Since then, the average crude price on three crude markets the system tracked had recorded a 7.28 percent increase as of Wednesday.

Although oil consumption has remained weak amid a global economic slump, export bans on Iranian oil and intensifying conflicts in the oil-rich Middle East have driven up crude prices over the past month, analysts said.

Unlike previous hikes, the government did not delay the price increase this time because of significantly reduced inflationary pressure and the need to ease refineries' losses, said Chen Qing, an analyst with Zhuochuang Information Services, a commodity information service provider.

Official data released early Thursday showed that prices have fallen across the Chinese economy, with the consumer price index (CPI), the main gauge of inflation, up by a 30-month low of 1.8 percent in July from a year earlier.

But the new price hike will nevertheless drive up domestic production costs, Chen said, estimating that the hike will push up the CPI by about 0.01 percentage point.

The logistics sector will be affected the most. As transportation fees account for 70 percent of total costs in the logistics sector, the sector will see a 1.79-percent increase in costs after the hike, according to Chen.

Opinions were divided on future price changes. Niu Li, an economist with the State Information Center, a government think tank, said continued price rebounds in the global oil market are less likely, as the world economy has shown little improvement.

However, Li Hong, an analyst with 100PPI.com, a major Chinese commodity data provider, said there will be another price hike in the domestic oil market in September if the current boom continues in the global oil markets.