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Most expect fuel prices to rise
POSTED: 10:04 a.m. EDT, August 3,2007

China's gasoline and diesel prices are expected to rise soon, with the driving forces likely to be big refiners' request for a price rise and the growing domestic inflationary pressure, in addition to the global crude oil price rise.

In a survey conducted by China Daily's website www.chinadaily.com.cn, 52.16 per cent of the 1,135 respondents, or 592 people, said they believed a price rise is coming, while 28.63 per cent, disagreed, with the rest offering no comment.

The survey question was: "The soaring global oil price is putting pressure on China, where the cost of fuel is expected to rise. Do you think this will be the case? Why?"

Though most respondents said oil prices in the country will eventually rise, they pointed out that the reason may not be that simple.

"CNPC (China National Petroleum Corporation) and Sinopec (China Petroleum and Chemical Corporation) will surely seize every possible opportunity to raise prices," said a participant, who added that the dominant positions of the behemoths grant them a bigger bargaining power in the market.

Another survey participant shared the same view saying that though the country's two largest oil companies are complaining about losses because of rising prices on the world market, they have made thousands of billions of yuan in net profit and their employees still get fat pay.

The National Development and Reform Commission (NDRC), the country's top economic planner, is reportedly under pressures from refiners to raise gasoline prices. CNPC and Sinopec recently joined a group of applicants to seek a price hike for refined oil products.

The producers suggested NDRC should raise gasoline prices by more than 220 yuan per ton and diesel prices by roughly 150 yuan per ton. Sinopec said it would suffer losses of more than $10 in refining every barrel of imported crude oil.

Accumulating inflationary pressure is also being seen as a possible trigger for the likely hike in fuel prices.

Some respondents also said limited resources may lead to the coming fuel price rise along with high oil exploration costs, China's attempts to liberalize its gasoline and diesel prices as well as energy-saving concerns.

Some respondents who said they believed fuel prices would not rise said China is already under high inflationary pressure. That may intensify if fuel prices are raised.

"Any rise in fuel prices will push up prices of everything from agriculture and transportation to manufacturing, thus leading to another round of inflation," a respondent said.

Cao Changqing, pricing department director of NDRC, has said the government is considering subsidies for crude oil refiners to help them meet the growing demand and maintain price stability.

China has started reforms to gradually deregulate refined oil prices but prices of gasoline and diesel are still regulated.

Reforms have gathered pace since last year, with prices being raised twice. But the momentum has slowed down this year as global oil prices rose sharply in March and June.

Some respondents said the government should do more to encourage alternative energy sources given the skyrocketing prices of oil internationally and limited oil resources.

From: chinadaily
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