A timely cap on oil prices

The cuts in the retail prices of gasoline and diesel from Thursday might be unlikely to appease those Chinese drivers who have complained that the prices of domestic refined oil products fail to reflect the sharp fall in international crude oil prices.

But China's decision to put a floor and ceiling on gasoline prices is a needed attempt to help cushion Chinese oil companies against the extraordinary volatility of international oil prices, which could hurt not only the country's energy security but also its efforts to reduce its dependence on fossil fuels for greener growth.

The National Development and Reform Commission, the nation's top economic planner, cut domestic pump prices on Wednesday and made $40 and $130 the limits between which domestic prices will be regularly adjusted in line with changing global crude oil prices.

But although the decline in international oil prices, already more dramatic and long-lasting than most expected, has brought about a windfall for their counterparts in some other countries, Chinese drivers should not expect the country to keep cutting domestic pump prices.

As a top importer, it is tempting for China to regard low oil prices as a net benefit for its economy, which is set for the slowest growth in a quarter of a century.

Yet the very fact that China's dependence on imported oil will not peak anytime soon means that the country needs a bigger buffer than most countries against a sudden rise in oil prices. It is believed that the longer international oil prices remain low, the more violent the upswing when it comes will be.

A domestic price range is therefore needed to enable Chinese oil companies to maintain their production capabilities in spite of the changing cost of crude.

Meanwhile, the need to increase long-term investment in green energy also requires government efforts to control the spillovers from the extreme volatility of oil prices.