Sat, June 09, 2012
Business > Economy

Fuel prices cut to fight slowdown

2012-06-09 02:43:38 GMT2012-06-09 10:43:38(Beijing Time)  China Daily

Taxi cars wait for fueling at a gas station in Shanghai, east China, late at night on June 8, 2012. China lowered the per-tonne retail prices of gasoline and diesel by 530 yuan (84 U.S. dollars) and 510 yuan, respectively, starting from Saturday. The move, which marks the second cut in a month, was made in response to lower crude prices on the global market. (Xinhua/Pei Xin)

A worker changes the fuel price information at a gas station in Shanghai, east China, at zero hour on June 9, 2012. China lowered the per-tonne retail prices of gasoline and diesel by 530 yuan (84 U.S. dollars) and 510 yuan, respectively, starting from Saturday. The move, which marks the second cut in a month, was made in response to lower crude prices on the global market. (Xinhua/Pei Xin)

A worker fuels a car at a gas station in Beijing, capital of China, in the early morning on June 9, 2012. China lowered the per-tonne retail prices of gasoline and diesel by 530 yuan (84 U.S. dollars) and 510 yuan, respectively, starting from Saturday. The move, which marks the second cut in a month, was made in response to lower crude prices on the global market. (Xinhua/Liu Changlong)

Taxi drivers stop their cars to refuel at a gas station in Beijing, capital of China, in the early morning on June 9, 2012. China lowered the per-tonne retail prices of gasoline and diesel by 530 yuan (84 U.S. dollars) and 510 yuan, respectively, starting from Saturday. The move, which marks the second cut in a month, was made in response to lower crude prices on the global market. (Xinhua/Liu Changlong)

A worker changes the fuel price information at a gas station in Xi'an, capital of northwest China's Shaanxi Province, in the early morning on June 9, 2012. China lowered the per-tonne retail prices of gasoline and diesel by 530 yuan (84 U.S. dollars) and 510 yuan, respectively, starting from Saturday. The move, which marks the second cut in a month, was made in response to lower crude prices on the global market. (Xinhua/Li Yibo)

Deepest reductions in more than 3 years come as global market drops

Gasoline and diesel prices have been cut for the second time in a month amid growing government efforts to reverse a sharp slowdown in the economy.

The reduction came after an interest rate cut on Thursday — the country's first in nearly four years — prompting analysts to suggest that data due this weekend will show May trade and industrial activity was even weaker than pessimistic forecasts had suggested.

"Markets are bracing for a potentially bad set of May economic data for China," said Moody's Analytics economist Alaistair Chan in a report.

Beijing is unveiling new measures almost daily to shore up growth that slowed to 8.1 percent in the first quarter and is expected to decline further.

The National Development and Reform Commission said on Friday the country will cut its retail fuel prices by more than 5.5 percent on Saturday, the deepest since December 2008, in tandem with the global slump crude oil prices.

It lowered retail gasoline prices by 530 yuan ($84) a metric ton, or 0.38 yuan a liter, to be capped at 8,320 yuan a ton.

Diesel prices were down by 510 yuan a ton, or 0.43 yuan a liter, to 7,510 yuan a ton.

Gasoline prices were down 5.5 percent, while diesel dropped by 5.8 percent, down from a previous cut on May 10 when prices were reduced about 4 percent.

China had raised fuel prices in February and March.

The moving average price of Brent, Dubai and Cinta, a basket of oil prices that China refers to for fuel price adjustments, has dropped by more than 9 percent so far since the last reduction.

The move is the second cut this year, indicating the country's determination to have domestic fuel prices more closely linked to global oil prices, even though the latest cuts were narrower than market expectations by at least 600 yuan a ton.

The cut may help lower transport and storage costs for operators in key industry sectors such as agriculture, forestry and fisheries, said Han Jingyuan, an analyst with JYD Commodities Hub, a petrochemical e-trade platform.

Both Brent crude oil prices and crude futures at the New York Mercantile Exchange registered their biggest drops since 2008 in May, dampened by the bleak global economies, in particular the deteriorating debt crises in Europe.

The oil price plunge, however, raised hopes that China may start its fuel pricing reforms.

Under the current mechanism, started in 2008, the government may adjust fuel prices if the average movement of the three reference markets' oil prices change 4 percent.

The current pricing program remains complex and not nimble enough to reflect global crude oil prices, said Zhou Dadi, former director of the NDRC's energy research institute, adding that further reform to reflect supply and demand is a must.

The government may take the opportunity of global price drops to narrow the gap between international and domestic crude charges, and then introduce reforms to avoid volatility and market speculation, JYD's Han said.

The revamp of the current pricing program is now just a matter of time, said Han Wenke, director of the NDRC's energy research institute, and a guest China Daily economist.

Related news:

China cuts fuel prices for second time in a month

China will lower the per-tonne retail prices of gasoline and diesel by 530 yuan (84 U.S. dollars) and 510 yuan, respectively, starting from Saturday, the National Development and Reform Commission (NDRC) announced Friday.

China to cut fuel prices from Saturday

China will lower the per-tonne retail prices of gasoline and diesel by 530 yuan (84 U.S. dollars) and 510 yuan, respectively, from Saturday, the National Development and Reform Commission announced Friday. Full story

China cuts fuel prices for first time in 2012

China will lower the per-tonne retail prices of gasoline and diesel by 330 yuan (52.38 U.S. dollars) and 310 yuan, respectively, from Thursday, the National Development and Reform Commission (NDRC) announced Wednesday. Full story

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