China raises price of fuel at the pump

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After a week of rumors the Chinese body responsible for monitoring oil prices in China, the National Development and Reform Commission (NDRC) raised gasoline prices by CNY230 and also raised diesel prices by CNY220rmb per metric ton. The end result for consumers is not good, with prices rising by 0.19rmb per liter on certain products:

• 90# – 6.48 (increase of 0.17)
• 93# – 6.92 (increase of 0.18)
• 97# – 7.37 (increase of 0.20)
• 98# – 7.92 (increase of 0.28)

Diesel prices have increased as follows:

• 0# – 6.88 (increase of 0.19)
• -10# 7.29 (increase of 0.20)
• -20# 7.64 (increase of 0.21)
• -35# 7.92 (increase of 0.32)

This round of price hikes brings Chinese fuel prices closer in line with international prices, after major refineries were deeply upset with the government keeping the price of fuel artificially low for many years which kept refineries permanently in the red with their bank statements. Fuel prices still remain slightly lower than international levels per metric ton due to the government worrying that a sudden hike in fuel prices will have a knock on effect on consumer inflation which is already at a new high after 2008′s economic turmoil.

The NDRC are expected to introduce a new pricing structure for fuel towards the end of the year which will be easier to understand than the current method which relies on the price of international crude has a price change of 4% or more over a period of 22 days, the new method is expected to be more transparent and will allow for a change in the supply and demand.

JP Morgan Chase is forecasting that crude oil future will raise to $81 in the fourth quarter, and prices rising to $100 per barrel in early 2011, which will mean more misery for Chinese drivers.