China to Cut Fuel Prices for the Third Time Since May
China will be cutting retail fuel prices by 5 percent starting today making it its third reduction in just two months. Some consider this as a move that will leave refiners in the red but will lure consumers back to the pumps. China the second largest user of oil in the world, still makes up half of the oil demand in the incremental global total.
According to the National Development and Reform Commission said that starting today the ceiling for gasoline retail prices will be decreased by 420 yuan a ton and diesel price by 400 yuan. The decrease is equivalent to .31 yuan per liter for gasoline and .34 yuan for diesel. Based on china’s fuel pricing rules, the government will consider changing fuel prices only when a weighted moving average of the three types of international crude oils increases or decreases by 4 percent and interval of the two price changes will be at least 22 working days. The government will also take into consideration factors such as inflation, supply and demand.
China has long been planning to change the current fuel price scheme to reflect refining costs together with plans of lowering trigger costs, shortening review period and changing the composition of rules governing pump prices. This a good time to launch the new scheme since international crude oil price have reached a mid point therefore can meet the cost of domestic fuel production.