As global oil prices tumble, China increases consumption tax on certain oil products
China's Ministry of Finance said it would cut the official price of gasoline and diesel but would, in fact, raise the tax on a number of oil products in a bid to lessen pollution and improve energy conservation.
The top planning body revealed it would increase consumption tax on naptha, lubricants and gasoline by 0.12 yuan ($0.02) per litre to 1.52 yuan. Tax on fuel oil, diesel and jet fuel will also increase to 1.2 yuan per litre. The proceeds of the increase would be used to combat China's stifling air and water pollution.
Some believe that cheaper oil will have an unexpected, adverse effect on the new energy segment as motorists continue to fill their cars with dirty, inexpensive fuels and lubes.
Nonetheless, the increases are partially offset by cuts of 0.13 and 0.2 yuan per litre on gasoline and diesel, respectively. The government's fiscal revenue has also increased as a result of the price changes.
In a further bid to take advantage of falling oil prices, China is also stockpiling oil at a staggering rate. Reuters estimate Chinese oil imports rose by 10% in December to 32m tons, thereby doubling the addition to its strategic reserves to around 124m barrels.