China raises gasoline, diesel prices by 4.5%

China raised retail gasoline and diesel prices by up to 4.5 percent, the first increase this year, to reflect higher crude costs on international markets.

The National Development and Reform Commission, which sets energy prices, raised gasoline and diesel prices by 350 yuan (US$53) a ton, effective today. The NDRC last adjusted rates on December 22, when prices went up about 4 percent.

At gas stations in Shanghai, the ceiling price for the widely used 93-octane gasoline is now 7.39 yuan, up from 7.11 yuan a liter; the price for 97-octane gasoline is now 7.86 yuan from 7.57 yuan; and the cost of zero-grade diesel is 7.33 yuan, up from 7.03 yuan. Pump rates vary among regions.

Under a cost pass-through mechanism introduced in late 2008, the government may revise gasoline and diesel prices when a basket of benchmark international crude oil prices changes more than 4 percent over 22 working days.

The NDRC said yesterday the rise in international crude prices allowed it to hike prices as early as one month ago, but it held off on the plan due to the Spring Festival holiday, the country's busiest transport season of the year.

The crude basket had risen 11.65 percent by Thursday and that should translate to a price increase of 400 yuan to 500 yuan a ton for gasoline and diesel if the pricing system is strictly followed, according to consultancy C1 Energy.

Though inflationary pressure is high, China had to raise fuel prices to reflect supply and demand, and the scarcity of oil resources, the NDRC said.

"Excessively fast growth in oil consumption has exceeded China's tolerance capacity both economically and environmentally," the NDRC said in a statement.

Railway and urban bus fares won't rise after the fuel price hike, the NDRC said. But local authorities are allowed to raise cab fares to reduce the impact on the taxi industry.

The price hike would also help China's private sector refiners, which account for 10 to 15 percent of the nation's refining capacity, to maintain normal operations, thus ensuring domestic supply, the NDRC said.

Sinopec and PetroChina, in anticipation of the price hike, recently asked subsidiaries to control sales volumes, according to a C1 report.