China explains details of new oil pricing mechanism

Source: Xinhua | 05-09-2009 08:33

BEIJING, May 8 (Xinhua) -- China's top economic planner Friday announced details of the country's new oil pricing mechanism, for the first time after the new pricing system kicked in at the beginning of this year.

In a statement on its website, the National Development and Reform Commission (NDRC) said China would adjust domestic fuel prices when global crude prices reported a daily fluctuation band of more than 4 percent for 22 working days in a row.

The commission said refiners would enjoy "normal" profit when global crude prices are below 80 U.S. dollars per barrel, but would face narrower profit margins when the crude prices rise above 80 U.S. dollars per barrel.

However, fuel prices would not go further up, or only be raised by a small margin, when crude prices rise above 130 U.S. dollars per barrel, and fiscal and tax tools would be used to ensure supplies, the NDRC said.

Light, sweet crude for June delivery rose 37 cents a barrel to settle at 56.71 U.S. dollars on the New York Mercantile Exchange Thursday after reaching a six-month high of 58.57 dollars.

Crude prices staged strong rally on news of upbeat economic data in the United States, rising more than 10 percent in two weeks.

The NDRC statement also came a day after it denied an online report claiming imminent price hike.

C1 Energy, an energy information website, Thursday reported that the Chinese government would raise fuel prices as of midnight Thursday, but said later the price adjustment had been canceled, with reasons unknown.