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China hikes fuel prices by biggest margin in three years

world Updated: Mar 20, 2012 13:32 IST

AFP
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China on Tuesday hiked fuel prices by the biggest margin in nearly three years after a surge in the cost of global crude, the government and state media said.

The rise is the second this year and comes as the government has more leeway to adjust price levels while inflation eases from three-year highs seen in mid-2011.

The benchmark retail price for petrol will rise by 0.44 yuan ($0.7) per litre while the price for diesel rises by 0.51 yuan ($0.8), state planner the National Development Reform Commission (NDRC) said in a statement late Monday.

"This is a result of surging global crude prices and easing domestic inflationary pressures," Liao Kaishun, an analyst at industry consultancy C1 Energy, told AFP.

"The NDRC might also have done it out of consideration for energy conservation and emission reduction, for which low resource prices will certainly do no good," he said.

The commission can adjust fuel prices when international oil prices move by more than four% over a 22-working day period. Beijing limits rises in fuel costs to insulate domestic consumers when international prices rally.

The latest move works out to a rise of about 600 yuan per tonne, the largest since June 2009, the official Xinhua news agency reported.

After the increase, the benchmark price for petrol would rise 7.0% to 9,180 yuan per tonne and diesel would rise 7.8% to 8,330 yuan per tonne, the commission said.

China also raised prices last month by 300 yuan per tonne for both petrol and diesel.

Inflation eased last month to 3.2% -- its slowest pace since June 2010 following a string of interest rate hikes and other monetary tightening measures by Beijing.

"Inflation appears to have subsided, providing room for the second oil price hike (this year)," Australia and New Zealand Banking Group said in a research note Tuesday.

"The direct impact on CPI (consumer price inflation) will be manageable at this stage."

China fears surging inflation carries the potential to spark social unrest.

Announcing the latest fuel price hike, the government said it would offer subsidies to sectors like mechanised agricultural and taxi drivers to lessen the impact.

Despite the benefit to Chinese oil refiners, which can now charge more, shares of the country's two energy majors were lower on Tuesday.

In Shanghai trading, PetroChina slipped 0.29% to 10.23 yuan while Sinopec fell 0.65% to 7.59 yuan at midday.

In Hong Kong, PetroChina dropped 1.06% to HK$11.20 and Sinopec lost 1.99% to HK$8.87.

China is the biggest energy consumer in the world and the second biggest consumer of oil.