China not yet ready to cut oil prices: NDRC

Updated: 2011-08-08 11:13


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BEIJING - The Chinese government will not lower oil prices for the time being, as conditions for price cuts have not yet been met, the nation's economic planning agency told Xinhua Monday.

The remarks were made by the head of the pricing department of the National Development and Reform Commission (NDRC) in response to claims by the public that China's current domestic prices fail to reflect falling international crude oil prices.

Global oil prices plummeted recently on concerns that the negative impact of a prolonged US debt crisis and fears of a double-dip global recession will sap oil demand.

On August 4, prices for West Texas Intermediate (WTI) crude oil dropped to $86.8 per barrel from around $120 in April, while Brent crude slumped to $107.3 per barrel.

China's current oil pricing system was introduced in May 2009. The system gives the NDRC the right to adjust domestic fuel, diesel and gas prices when average prices for Brent, Cinta, and Dubai crude oil move by 4 percent within 22 consecutive working days.

"Average prices in the three markets are still above the level of April 7, when the NDRC previously hiked prices. Therefore, we are not yet ready for more price cuts," the NDRC official said.

He said that although global oil prices registered steady increases within the month of May, the NDRC did not raise domestic oil prices because of soaring production costs for the country's oil refiners.

China's refiners have long complained about rigid oil product prices and volatile crude prices creating uncertainties for their businesses. The government gives handsome subsidies to major refiners such as Sinopec and PetroChina in compensation for their annual losses, as oil prices have a strong bearing on social stability in China.

Oil prices have been increasingly sensitive recently as a result of the country's stubbornly high inflation rate. China's Consumer Price Index (CPI), a major gauge of inflation, hit a three-year high of 6.4 percent in June.