Chinese government planners have cut fuel prices for the first time this year in an effort to tame inflation
Filling up Image: Melanie_Ko |
China's National Development and Reform Commission (NDRC) has decided to reduce wholesale prices for both diesel and gasoline by 300 yuan ($47.20) per metric ton. This reduces the country's diesel prices by 3.9% at 7,430 yuan ($1,165) per tonne, with gasoline dropping by 3.5% to 8,280 yuan ($1,298) per tonne. The world's second-largest economy is trying to slow inflation as the worsening financial crisis in the west threatens to sap export demands.
Sinopec and PetroChina have been asked to “perform a national service” by offering cheap fuels, according to Gordon Kwan at Mirae Asset Securities Ltd. Kwan also speculates that even more cuts should be expected if the Brent crude price - benchmark for around half the world's oil output - falls below $100 a barrel by winter 2011.
The price cuts could squeeze Chinese refiners, who are already facing losses as the cost of imported oil increases. Kwan estimates that domestic refiners are losing up to $6.5 per barrel on imported oil refined into fuels. Though bad news for refiners, NDRC planners hope that the fuel price cuts will help lower China's Producer Price and Consumer Price Indexes in the winter months.