Gas, diesel prices raised to record level

Domestic diesel and gasoline prices have been raised by 600 yuan ($94.90) per ton, effective today, the National Development and Reform Commission (NDRC) announced yesterday, following a steep rise in global crude oil prices.

After the price adjustment, retail prices of refined oil products will reach a record high, with prices of diesel rising by 0.51 yuan per liter and gasoline by 0.44 yuan per liter.

Gasoline prices in big cities like Beijing, Shanghai and Guangzhou will top 8.2 yuan per liter. The rise in oil prices is the biggest increase since June 2009. On February 8, the NDRC raised domestic gasoline and diesel prices by 300 yuan per ton, or 3.6 percent.

Liu Zhi, a Beijing-based civil engineer, said that more than 8 yuan for a liter of gasoline is too expensive and that he will drive less after the price increase.

"International oil prices have surged more than 11 percent since the last price adjustment, which would be equal to a 700 to 800 yuan increase in domestic prices," Li Li, an industry analyst with energy market research firm C1 Energy, told the Global Times yesterday.

Li noted that due to fears of inflationary pressure, the price increase cannot fully reflect the real change in international prices, but it will still allow for the losses of refineries to be greatly eased.

The current pricing mechanism allows the commission to adjust domestic oil prices if the average price of Brent, Dubai and Cinta crude oil changes by more than 4 percent over a period of 22 working days.

At present the average price is above $120 per ton, mainly driven by "uncertainties in the Middle East and also the slow recovery of the US and EU economies," according to Wang Jintao, an analyst at Zibo Zhongyu Information Technology Co.

He noted that international oil prices are expected to rise further in the first half this year, but are not likely to top $130 per ton any time soon.

Given the current increase in international prices, many traders and suppliers have hoarded supplies, waiting for domestic prices to increase.

Media reports said that the NDRC is expected to come up with a plan to reform the current pricing mechanism within the year, in a bid to make domestic oil prices more market-oriented.

"A reform in the pricing mechanism is expected to reduce hoarding practices in the industry. But given the increase in international prices these days, the mechanism may be delayed," said Wang.