Beijing plans to raise fuel prices by at least three percent in January.
The forecast comes as the capital introduces cleaner-burning gasoline and diesel before it hosts the Olympic Games, Bloomberg News reported.
Prices may rise by 190 yuan (US$25) a metric ton from the start of next year from about 5,000 yuan, Wang Yongjian, president of Sinopec Beijing Yanshan Co, a unit of the nation's biggest refiner, said in an interview on Wednesday.
The price gain will take effect as China introduces the Euro IV emissions standard in Beijing to cut pollution.
The price increase will help the company, a unit of China Petroleum & Chemical Corp, counter rising crude oil costs. Chinese refiners are losing money from oil processing as crude futures reached a record US$89 yesterday.
China controls prices of diesel and gasoline to curb their impact on inflation, which climbed 6.5 percent in August, the highest in more than 10 years.
"The company may lose more than one billion yuan this year if crude prices remain at about US$80 a barrel," Wang said. "We are under great operational pressure."
Prices of oil have risen 48 percent from a year ago. Revenue at the company, which relies on imports for about half of its crude oil demand, may reach 40 billion yuan this year, Wang said. "The price hike can't fully offset our losses caused by high crude prices and domestic government caps."
Oil prices need to fall below US$60 a barrel for Sinopec Yanshan to make a profit from processing, he said.
Sinopec Yanshan processes 10 million tons of crude a year and supplies 60 percent of Beijing's oil products. PetroChina Co and other retailers own the rest of the market.
The company is able to produce Euro IV-standard fuels after a facility upgrade in June, Wang said.
Fuel demand in Beijing may increase by five percent to six percent annually in coming years, Wang said.
The company plans to source crude from nearby PetroChina's Jidong Nanpu field, the country's biggest discovery in almost half a century. "Wherever oil is cheaper, we will source oil from there," Wang said.
Sinopec, as parent company China Petroleum is known, has started building a pipeline to pump crude from the Caofeidian port near the field to Yanshan, according to Wang.