China raises oil fuel prices by 10 per cent

May 24, 2006, 7:37 GMT

Beijing - China on Wednesday raised prices of oil-based fuel products by about 10 per cent, reflecting the surge in global oil prices.

Pump prices of petrol and diesel were immediately increased by a similar percentage in Shanghai, Beijing and other large cities as wholesale prices of petrol, diesel and kerosene for aviation all rose by 500 yuan (62.4 dollars) per ton.

The rise was introduced because Chinese prices were 'far below that on the international market, which is not helpful to oil refineries in China and to ensure adequate supplies', state media quoted an official from the State Development and Reform Commission as saying.

The maintenance of global oil prices at more than 70 dollars a barrel had forced the rise in China, the government's Xinhua news agency quoted the official as saying.

The increase takes the standard pump price of the most popular low-octane petrol up to 4.52 yuan (56 US cents) per litre from 4.13 yuan per litre in Shanghai, a rise of 9.4 per cent.

The commission urged local governments to implement a subsidy scheme designed to help vulnerable industries and public services.

It also asked China's two main refiners, China National Petroleum Corporation and Sinopec to increase supplies, the agency said.

China introduced a new system of subsidies in March, when it raised prices of oil products for the first time in eight months, by an average of about 6 per cent.

The subsidies are aimed at people in the grain, fishing and forestry industries, as well as public transportation firms in urban areas.

Industry officials said the earlier price rise was also a reaction to the growing impact of global oil prices on China, which imports more than 40 per cent of its oil.

China also announced plans in March to invest 180 billion yuan (22.5 billion dollars) in its over-stretched oil-refining and petrochemical industries over the next five years.

The government plans to increase its refining capacity by over 45 million tons to reach 170 million tons by the year 2010, the agency quoted Duan Wende, vice-president of PetroChina, as saying.