Oil prices up after the olympics

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An article from the LA Times speculates that gasoline prices at the pump in China are expected to rise once the Olympics are over.

SHANGHAI, China — While consumers in much of the world have been reeling from spiraling fuel costs, China has kept the retail price of gasoline at about $2.60 a gallon, up just 9 percent from January 2007.

During that same period, average U.S. gas prices surged nearly 80 percent, to about $4 a gallon.

But Chinese consumers are bracing for a big jump in pump prices after the Summer Olympics in Beijing end in late August.

“Everything will change after the Olympics,” said Tang Yao, a real-estate businessman, as he waited to fill up at a service station in a Shanghai suburb.

Most people think the central government doesn’t want to risk doing anything upsetting before the Games, which open Aug. 8. China is grappling with inflation running at an annual pace of more than 8 percent, mostly because of higher food costs.

“Before the Olympics, stability is paramount,” said He Jun, an oil analyst at Beijing Anbound Consulting. Last month’s earthquake in Sichuan province drove that point home, he said, and large supplies of fuel are being diverted for reconstruction there.

China is the world’s second-largest consumer of petroleum, behind the United States. The nation’s robust demand for oil, to support its booming economy and rising standard of living, has contributed to higher global prices and prompted Beijing to scour the world for energy resources.

China relies on imports for roughly half its oil use, which is growing at about 7 percent annually. Global oil topped $139 a barrel last week, double a year ago. But China raised pump prices only once in the past year, in November, by a little more than 9 percent.

Refined oil prices in China are half of international levels, leaving Beijing to shell out $30 billion in subsidies in 2007, according to China International Capital Corp. (CICC), a Beijing investment bank.

Read the rest here.