China Considers Raising Fuel Prices on Consecutive Crude Oil Price Increases

China, the second biggest oil consumer worldwide, may possibly raise diesel and gasoline prices after three straight price reductions as an increase in a set of the crude prices reach a trigger level as gathered by the latest government data.

According to the recent C1 Energy data, the moving Brent, Cinta and Dubai’s average per barrel crude oil price on the 30th of July was 4.47% higher than the level when fuel costs were last reduced by China.

However, the government will be deliberating on this issue until the early parts of August, around a month following the last reduction from Beijng on the 11th of July and in accordance with the rules of the present one-month review period.

C1 Energy is a semi-government institute that compiles price data to assist the National Development and Reform Commission’s computations. The NDRC is then responsible for setting China’s fuel prices.

The NDRC has announced that it is considering altering the costs of fuel if the moving average in 22 days of the per barrel crude oil price in the international market increases or decreases by 4 percent. Moreover, the government will consider other factors, like inflation and the supply and demand considerations for fuel.

But, it has not made an official announcement of its daily computations, given the grades of crude that are utilized or provided their weightings since it introduced the formula for pricing back in 2009.

Many leaders and analysts believe it is time for China to replace its present scheme on fuel pricing to reflect the cost of refining even better by such actions as reducing the so-called “trigger point,” cut the period of adjustment and alter the makeup of the crude basket to which prices at the pump are linked.

By: Chris Termeer

Chris Termeer

Chris Termeer is an oil and gas consultant, industry commentator and analyst. His book, Fundamentals of Investing in Oil and Gas provides a comprehensive overview of all aspects of the oil and gas industry, including exploration, drilling, production, storage, transportation and refining, to name but a few.

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