Retail fuel prices may increase

China may raise retail fuel prices under a pricing mechanism as early as next week due to changes in international crude oil prices, analysts said.

Under the mechanism introduced in late 2008, the National Development and Reform Commission can revise gasoline and diesel prices when prices of benchmark international crude oil in a basket change more than 4 percent over 22 working days. The basket, which includes Brent, Dubai and Cinta, has risen 9.49 percent since China last increased fuel prices by around 4 percent on December 22, C1 Energy, an industry consulting firm, said yesterday.

Besides the changes in global oil prices the NDRC, China's top planning agency, also considers other factors such as inflationary pressure and demand/supply conditions when it decides to adjust retail prices.

The NDRC has previously either postponed price increases or reduce the degree of the price hikes to offset a negative impact. This time, the NDRC may delay the price rise until after the Lantern Festival - the last day of the Lunar New Year celebration - which falls on next Thursday, C1 Energy analyst Liao Kaishun said.

The pricing mechanism was designed to ensure reasonable profit for Chinese refineries, which had suffered huge losses when crude costs surged as the government capped prices of refined products.

Source: Shanghai Daily