China raised retail fuel prices for the second time this year after oil’s advance to a 30-month high undermined government efforts to cap costs and cool inflation in the world’s second-largest economy.
Prices will rise by as much as 5.8 percent today, with gasoline increasing by 500 yuan ($76) a metric ton and diesel by 400 yuan, the National Development and Reform Commission said in a statement yesterday.
Crude fell on concern higher prices will reduce demand in the world’s second-largest oil consumer, while shares of China’s biggest refiner gained. The fuel-price increase came two days after the Chinese central bank raised interest rates for the fourth time since October to tame inflation that exceeded the government’s target.
“China has reluctantly raised domestic gasoline and diesel prices to record highs,” said Gordon Kwan, head of regional energy search at Mirae Asset Securities in Hong Kong. “The move is like pulling teeth with the government amid the anti- inflation campaign.”
China last raised fuel tariffs by as much as 4.6 percent on Feb. 20, based on a mechanism introduced in December 2008 that allows adjustments when crude costs change more than 4 percent over 22 working days. Consumer prices rose at an annual 4.9 percent pace in February, surpassing the government’s target of 4 percent for 2011.
China Petroleum & Chemical Corp., the country’s largest refiner, gained 0.9 percent to HK$8.09 in Hong Kong trading at 11:11 a.m. local time. PetroChina Co. fell 0.5 percent to HK$12.16. The Hang Seng Index declined 0.1 percent.
‘Into a Corner’
Crude climbed to $108.83 a barrel in New York yesterday, the highest settlement since Sept. 22, 2008, on concerns that conflict in Africa and the Middle East may curtail supplies.
“As much as the government wants to not raise prices, events in the Middle East have forced China into a corner,” Ben Simpfendorfer, publisher of China Insider and former chief economist at Royal Bank of Scotland Group Plc, said by mobile phone. “It’s a minor setback” in the fight against inflation.
The benchmark retail price of gasoline will increase by 0.37 yuan a liter and that of diesel by 0.34 yuan, the NDRC said.
After the adjustment, gasoline in China will retail at $1.05 a liter on average, according to Bloomberg calculations based on prices set by the NDRC for the country’s provinces and regions. That compares with $2.17 a liter in the U.K. and 97 cents a liter in the U.S.
China will continue subsidizing industries including farming, fishing and public transport, the NDRC said yesterday.
“Global crude oil prices may remain high,” the country’s top economic planner said. “Adjusting fuel prices will help curb excessive use of oil and contribute to energy saving.”
Crude has advanced 29 percent in New York since Feb. 15, when unrest in North Africa and the Middle East spread to Libya, formerly Africa’s third-biggest oil producer. Futures fell 0.4 percent to $108.44 a barrel in electronic trading at 11:03 a.m. Singapore time.
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