Fuel Pricing System to Undergo Restructuring

Fuel Pricing System to Undergo RestructuringChina will be restructuring its fuel pricing system that will allow refiners to adjust its domestic prices of gasoline and diesel faster in response to the changes on world crude prices of fuel.

Under the current system is measuring the change in the 22 day moving average cost of crude grades that has a 4 percent threshold for revisions does not allow domestic fuel prices to move as fast enough compared to international crude costs.

China is currently the world’s second largest consumer of oil and is now studying plans to shorten the 22 days adjustment period and scrapping the 4 percent threshold as well. This is considered more aggressive that the previous proposal that is to cut the trigger range only. This move will allow more frequent adjustments to domestic fuel prices therefore boosting profits for the refining divisions of Sinopec and PetroChina. By having higher fuel prices will curb excessive fuel consumption and also weigh the country’s oil demand growth.

By making the adjustment period shorter to better reflect the global price changes and they are also preparing to scrap the 4 percent which makes the system much more flexible. By the end of 2017 the country will make the national V standards compulsory for all automotive diesel fuel which is similar to Euro V standard that has a sulphur content no greater that 10 ppm.

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