Chinese policymakers are considering cutting domestic fuel prices for the first time in almost two years after a more than 50 per cent dive in crude oil prices returned refiners to profit, officials said today.
The tumble in global crude prices from a record above $147 in July to $67 a barrel today, has dragged gasoline prices in the United States to below Chinese rates for the first time in years, piling pressure on Beijing, which is also working to combat slowing economic growth amid the financial turmoil.
Two oil industry sources told Reuters that state-owned oil companies under pressure to fulfil their social obligations had submitted a proposal to cut fuel prices by an undisclosed amount to the National Development and Reform Commission (NDRC), which sets energy policy and regulates energy prices.
The NDRC could submit the initiative to the State Council for a final decision as soon as next week, one of the sources said.
"International oil prices have fallen a lot and the government wants to make pump prices on a floating basis in the long term. The possibility of an imminent cut is high," said an oil trader from Beijing, who asked not to be named.
"The documents for the cuts are already sitting on the desk for the final approval," he added.
A cut would come just four months after China unexpectedly raised state-regulated retail gasoline and diesel prices by up to 18 per cent, its first increase in eight months and the sharpest ever one-off rise.
Two weeks later oil prices began their biggest-ever decline on concerns that higher prices - including in subsidised markets like China and India - were finally curbing demand. The rout has gathered pace recently as the global financial crisis worsens.
Reuters