Second increase in two months follows oil's surge on int'l markets

BEIJING - Retail gasoline and diesel prices were raised on Sunday, the second increase in two months, in a bid to tame rising domestic fuel demand amid surging crude oil prices on the international market.

Gasoline and diesel prices increased by 350 yuan ($53.2) each per ton, or 4.5 percent, since midnight on Sunday, the National Development and Reform Commission (NDRC) said in a statement on its website.

The increases are based on a mechanism, introduced in 2009, that allows the NDRC to adjust fuel prices when the cost of crude fluctuates by more than 4 percent over 22 working days.

Brent crude futures, traded in London, have jumped almost 10 percent since China last increased fuel prices on Dec 22.

"The adjustment meets market expectations that China would raise fuel prices by 300 to 400 yuan per ton to be in line with rapidly rising crude prices resulting from the volatile situation in the Middle East," said Cindy Liang, a senior analyst at energy information provider Platts. She added that the latest move could also ease losses by domestic refineries and boost production incentives.

The government considered various factors before announcing the decision, such as inflation, Cao Changqing, head of the price department at the NDRC, was quoted by Xinhua News Agency as saying.

The country's consumer price index (CPI), the major gauge of inflation, reported a slower-than-expected growth rate of 4.9 percent in January, which may have partly contributed to the government's decision, analysts said.

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China, the world's second-largest oil consumer, reported an overseas oil dependence ratio of 55 percent in 2010. Figures from the National Bureau of Statistics show that China imported 239 million tons of crude oil last year, up 17 percent from a year earlier.

With such large percentages, "the impact of international crude price changes on the Chinese market carries increasing significance", the NDRC said.

With oil prices rising and likely to rise in the future it is important that consumption is monitored to enhance efficiency, the NDRC said.

"Fuel prices have risen frequently in recent years," said Xie Yun, a car owner living in Beijing.

"They do not surprise me anymore, but the cost of having a car is going up too fast, so I'm considering not using it for commuting."

In addition, as global oil prices are still on an upward trend, analysts said greater efforts to develop clean energy are essential to alleviate China's reliance on fossil fuels.

"To ensure energy security, China has to cut its dependence on oil and make more use of non-fossil fuels such as solar power for sustainable growth," said Wang Jiacheng, a researcher at the Academy of Macroeconomic Research under the NDRC.

Oil prices may increase further in the future if the global economy continues to recover, said Zhou Dadi, former director of the Energy Research Institute under the NDRC. Industry experts estimated that more fuel price increases will come this year.