Tax rise may push up oil, gas prices in China
By Wang Ying (China Daily)
Updated: 2005-08-11 06:04

Increased tax on oil and gas exploitation, coupled with soaring crude prices, may lead to further price hikes for refined oil and natural gas, industry experts have said.

A taxi driver pushes his car forward while queuing for business before a shopping mall in Zhengzhou, capital of Central China's Henan Province, July 30, 2005. [newsphoto]

From July 1, crude oil exploitation tax rose 25 per cent to 300 per cent, while the tax on gas rose 40 per cent to 50 per cent.

The rises were based on reserves and exploitation facilities, according to a Tuesday notice on the website of the State Administration of Taxation.

But the taxation adjustment will have little impact on the country's oil and gas producers because of high profits from soaring crude prices, experts said.

Neither will it directly push up domestic refined oil prices, which are mainly determined by the world crude prices, said analysts.

"If crude prices remain at the current level or rise further, the government may consider increasing gasoline and diesel prices," said Huang Meilong, a chief analyst at the Shanghai Shenyin Wanguo Research and Consulting Co Ltd.

Natural gas prices are hard to predict because tax is only one of several factors, said Gong Jinshuang, a senior analyst with China National Petroleum Corp. Other factors include market supply and demand, and government concerns over stabilizing the economy, Gong said.

But Huang admitted that currently there is pressure for a rise in natural gas prices, which are still controlled by the government.

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