Rising international prices and China's increasing demand for oil, fueled by the country's fast economic growth, prompted it to hike on Wednesday the price of processed petroleum fuels.

The price of gasoline, diesel and aviation kerosene jumped 500 yuan (62.4 U.S. dollars) per ton.

The price increase, the second in the last two months, aims to narrow the gap between international oil prices and domestic prices, a spokesperson with the National Development and Reform Commission (NDRC), the industry watchdog, told Xinhua on Wednesday. The official asked not to be named.

The official said China has become an important player in the global economy so domestic oil prices should not only reflect availability of domestic resources, but also the fluctuations of the international market. Gasoline prices in China have been much lower than in most other countries.

Higher prices will also help meet the country's goal of building an energy-saving society by encouraging conservation, lower consumption and better utilization of resources, he said.

Last year, China imported 136 million tons of oil, accounting for 42.9 percent of the country's total oil consumption.

"If China's oil prices continue to be lower than that on the international market, then domestic oil supply can not be guaranteed," the official noted.

China's per capita oil resources are only 7.7 percent of the world's average level.

China's energy consumption per unit of GDP was 3.36 times greater than the world average in 2004, four times that of the United States, and nearly eight times that of Japan, Britain, Germany and France.

Irrationally low oil prices are one of the factors contributing to China's huge consumption of energy, he explained.

"Narrowing the gap between international and domestic oil prices will help promote energy-savings and better utilization of resources and in realizing sustainable development of China's economy," said the official.

Although Sinopec and PetroChina, the country's largest oil companies, made outstanding profits last year, the official said the price rise was mainly prompted by soaring global oil prices.

He noted that Sinopec and PetroChina, both state-controlled, publicly-traded enterprises, shoulder the responsibility of ensuring oil supply in the country. Their profits were mainly used for oil exploration and enhancing the country's oil supply.

PetroChina and Sinopec invested 124.8 billion yuan (15.6 billion dollars)in oil and gas exploration and 46.6 billion yuan (5.8 billion dollars) on new oil refineries last year, said the official.

The net profits of PetroChina were up 28.4 percent last year to 133.4 billion yuan (16.68 billion dollars) while Sinopec's profits rose 23 percent to 39.6 billion yuan (4.95 billion dollars)from a year earlier.

In response to criticisms of the monopoly held by the two oil giants, the official said there are high risks and tough competition in the industry and to be competitive oil companies need large scale operations that can manage the required huge investments.

He pointed out that the output capacity of most newly built oil refineries around the world were all above 10 million tons a year.

Since the 1990s, there have been many acquisitions and mergers of international oil companies and Sinopec and PetroChina have also been forced to make changes.

In order to manage the risks involved in oil exploration and to cut costs and enhance competitiveness, Sinopec and Petrochina restructured in 1998.

He also acknowledged that competition in the sector will increase in China as the country has committed to the World Trade organization that it would gradual open its market to other wholesalers and retailers of processed petroleum fuels.

Source: Xinhua