MOTORISTS across China are facing record high fuel prices today after the government raised rates by a larger than expected 6-7 percent to help refiners "reduce losses."
Retail prices for gasoline and diesel were raised by 600 yuan (US$95) per ton, the National Development and Reform Commission said last night.
The last increase was on February 8 when prices went up by 300 yuan per ton.
Though the timing of the increase was widely expected due to a recent spike in global crude oil prices, the range was much larger than thought. Some analysts had predicted a rise of 300-400 yuan.
At Shanghai pumps, the ceiling price for 93-octane gasoline is now 8.27 yuan per liter, up from 7.79 yuan; 97-octane gasoline is now 8.80 yuan from 8.29 yuan; and zero-grade diesel costs 8.19 yuan, up from 7.67 yuan. Pump rates vary across the nation.
Not surprisingly, motorists were seen queuing up at several gas stations in the city last night after the rise was announced.
"I think I will park my car for a few days, but anyway I still have to drive and bear the prices which I just couldn't imagine several years ago," said Lin Weishi, 30, who drives about 30 kilometers every day. "The good old days may never get back."
The increase may also mean some people putting off plans to buy a new car, especially after the cost of a license plate in Shanghai hit an all-time high of 58,625 yuan in the monthly auction at the weekend.
The rise in the cost of fuel came after China's dominant fuel refiners, Sinopec and PetroChina, called for an increase in fuel prices to protect their refining business. PetroChina Chairman Jiang Jiemin said earlier this month that its refining loss last year was larger than the 50 billion yuan expected and was still widening.
Still, for PetroChina and Sinopec, the margin lost in refining can be partially recouped both upstream and downstream, or from their oil and gas production and fuel and chemical sales businesses respectively.
"We never see them ask for lower prices this actively when crude rates are down," was one online comment.
"Isn't this monopolist? Isn't this another hundreds of millions income for the oil companies? I've got to learn cycling," wrote another microblogger.
Under the current fuel pricing formula, the NDRC can adjust fuel prices if the 22-day moving average of a basket of global rates changes more than 4 percent, though it also looks at other factors such as consumer prices while making adjustments.
The increase reflects the fact that the government has more room to raise energy prices after inflationary pressure eased. It is also meant to encourage production and ensure market supply ahead of the spring planting season.
The commission said the 4 percent trigger point was met as early as February 24. It also reiterated that linking domestic fuel prices more closely to international markets could curb growth in demand.