Fuel price expected to rise up in February

2013-02-06 09:00:56 GMT2013-02-06 17:00:56(Beijing Time)  SINA.com

China's gasoline prices are expected to rise by 3.5 to 4 percent in mid February after the Spring Festival holidays, industry experts said Tuesday.

As of Monday, the average price of the basket of international crude oil prices used to calculate China's fuel prices - namely Brent, Cinta, and Dubai - had risen by 1.81 percent since the previous fuel price adjustment in November, data compiled by commodity consultancy Sublime China Information showed Tuesday.

Under China's fuel pricing mechanism, the National Development and Reform Commission (NDRC) can adjust gasoline and diesel prices when the average international oil price changes by more than 4 percent over a period of 22 working days.

Chen Qing, an analyst at Sublime China Info, predicted average international oil prices will rise by over 4 percent as early as February 14, mainly boosted by a series of positive economic data released by major economies.

"The NDRC might adjust fuel prices after the Spring Festival holidays, which means the price rise would come as early as February 16," she told the Global Times Tuesday, and forecast that the retail gasoline price would be raised by 350-400 yuan ($56-64) per ton from the current level of 8,520 yuan per ton.

China's fuel prices have usually tended to rise by 300-350 yuan per ton following Spring Festival holidays.

Investors often prefer to allocate their assets at the beginning of each year to high-risk commodities such as crude oil, rather than the low-risk bond market, which tends to push up the crude oil price, research agency ICIS C1 Energy said in a report published Tuesday, noting a strong possibility that the tendency of fuel prices to rise will continue this year.

Furthermore, a plan to upgrade China's fuel quality initiated by Sinopec Group following unusually smoggy weather in the country's central and eastern regions will boost the production cost of fuel by 0.12 yuan to 0.15 yuan per liter.

If the cost is transferred to consumers, it will result in a retail gasoline price increase of 0.2 yuan to 0.3 yuan per liter, Wang Xiaokun, another analyst at Sublime, said in a research note Tuesday.

Economists from the International Energy Agency and the International Monetary Fund have warned that high international crude oil prices could dent a global economic recovery.

"The international fuel price rise will bring inflationary pressure to China, and the country's CPI is likely to enter an upward spiral in 2013," Lian Ping, chief economist at the Bank of Communications, said last month.

China adjusted fuel prices eight times in 2012 as a result of fluctuations in the international market.

The last adjustment was on November 16, when the NDRC cut retail gasoline prices by 310 yuan per ton and diesel prices by 300 yuan per ton.

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