Chinese authorities cite complex Middle East situation, vow to crack down on pricing violations

A Chinese flag flies in the wind. [AP]
A Chinese flag flies in the wind. [AP]

Renewed tensions in the Middle East have pushed China's domestic fuel prices back to levels last seen immediately after the outbreak of the Iran war. Despite government efforts to limit the scale of increases, gasoline and diesel prices have risen repeatedly in recent weeks on the back of surging global crude prices.

China's National Development and Reform Commission announced Thursday that it would raise domestic gasoline prices by 395 yuan ($59) per metric ton and diesel prices by 385 yuan per metric ton, effective midnight Friday (local time).

After the adjustment, gasoline will cost 9,960 yuan (approximately 2.03 million won, or about $1,490) per metric ton and diesel 8,890 yuan (approximately 1.82 million won) per metric ton.

The NDRC said the geopolitical situation in the Middle East had become "complex and volatile," and that international crude prices had surged rapidly before falling, only to spike again recently. "To cushion the domestic impact of rising international oil prices, the state continues to apply temporary adjustment measures to domestic refined-product prices," the commission said.

Under the standard pricing formula, gasoline should have risen by 830 yuan per metric ton and diesel by 800 yuan, but state intervention kept the actual increases smaller, the NDRC said.

The commission added that it would guide refiners and distributors to maximize production and transportation capacity to ensure stable market supply. It also said it would work with relevant agencies to step up market inspections and "strictly crack down on violations, including failure to comply with national price policies."

Meanwhile, China periodically sets retail price ceilings for gasoline and diesel based on international crude prices and supply-and-demand conditions.

This year, China's fuel benchmark started on Jan. 21 at 7,670 yuan per metric ton for gasoline and 6,685 yuan for diesel. The US-Iran war drove prices sharply higher by March 24, when gasoline hit 9,905 yuan and diesel 8,835 yuan. Prices peaked on May 22 at a year-high of 10,165 yuan for gasoline and 9,085 yuan for diesel.

Global crude prices then stabilized as the United States and Iran held truce talks, and China's domestic fuel prices fell throughout June. By July 4, gasoline had dropped to 8,175 yuan per metric ton and diesel to 7,170 yuan. The reprieve was short-lived, however: prices reversed course soon after, and — with the exception of Aug. 15 — five consecutive price increases were announced between July and September.


chami@heraldcorp.com