China to cut fuel prices starting Friday

BEIJING - China will cut the retail prices of gasoline by 310 yuan ($49.2) and diesel by 300 yuan per ton starting from Friday, the National Development and Reform Commission (NDRC), the country's top economic planner, said on Thursday.

The move, following two consecutive rises, was the fourth such cut this year. It was made in response to recent crude price fluctuations on the global market, according to a statement posted on the NDRC's website.

The adjustments will lower the benchmark retail price of gasoline by 0.23 yuan per liter and diesel by 0.26 yuan per liter, the NDRC said.

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 changed the gasoline and diesel prices on Sept 10, raising them by 550 yuan and 540 yuan per ton, respectively.

The commission has ordered the country's three major oil companies to ensure the market supply. Its statement said price regulators at different levels will keep a close eye on local retail prices.

Wang Zhen, a professor at the China University of Petroleum, said the cut will help reduce production costs and raise profit for the petro-chemical sectors and their downstream industries, as well as the logistics sector.

"In general, the price adjustment is good news for the Chinese economy, which is now consolidating its momentum of a economic recovery," said Wang.

The price cut will directly lower China's consumer price index (CPI), a main gauge of inflation, by 0.007 percentage point, according to Hu Huichun, an oil market analyst from SCI, a leading commodity information portal.

Official data showed that China's CPI grew 1.7 percent year on year in October, the slowest pace since January 2010, when consumer prices increased 1.5 percent year on year.

The cut will further bring down inflation as it will reduce transportation costs, which influence the general price level, Hu added.

Analysts believe crude oil prices are not likely to rebound sharply in the near future, as global demand will stay weak while market supply will improve.

Qiu Xiaofeng, an analyst with Galaxy Securities, said there have not been obvious signs of global economic recovery, and oil demand has been declining in some developed economies. Meanwhile, the expanding use of renewable energies is playing a stronger role in determining crude oil prices.

China's economic restructuring has also slowed the growth of the country's total oil consumption, said Wang Zhen.

The professor also said that, with prices maintaining a downward trend, now is an appropriate time for the government to improve the pricing system, through means such as reducing the price adjustment cycle and changing the varieties of crude oil under monitoring.