Finally: Price relief hits the gas pumps

By Fu Chenghao  |   2008-12-19  |     NEWSPAPER EDITION

CHINA has slashed car, truck and jet fuel prices by up to 32 percent to reflect lower crude oil costs under a revamped pricing regime.

The first reduction in fuel prices in almost two years will ease costs for motorists, manufacturers and airlines beset by the global economic downturn.

The price of gasoline is cut by 13.8 percent, and the price of diesel will fall by 18 percent, effective today, the National Development and Reform Commission said yesterday. Jet fuel prices will drop by 32 percent.

Under the plan, the refinery-gate price of gasoline will fall to 5,580 yuan (US$818) per ton, while diesel declines to 4,970 yuan per ton, the government said. Jet fuel will drop to 5,050 yuan per ton.

Xinhua news agency said gasoline would fall by 0.91 yuan and diesel by 1.08 yuan per liter. But it did not say how that would apply across the range of prices for various grades of fuel or in different parts of the country.

In Shanghai, the widely used 93-octane gasoline was selling for 6.05 yuan a liter before the price cuts, and zero-grade diesel was being pumped for 6.03 yuan a liter.

Also yesterday, the country's top planning agency said the government has approved a plan to raise fuel consumption taxes starting in January, a move that was announced earlier for public comment.

But the tax increases appeared to be small enough that consumers still should see savings.

The tax on gasoline will rise to 1 yuan a liter from 0.2 yuan, and the levy on diesel will jump to 0.8 yuan from 0.1 yuan. The tax on other refined oil products such as fuel oil will also be raised, the NDRC said without specifying.

Analysts expected the price cuts, as the government has pledged to reform its oil pricing mechanism by better aligning domestic prices to international levels. But many believed the cuts would not come until January 1, when the proposed new pricing and tax reform plan takes effect.

The government earlier unveiled a cost-plus pricing formula, under which prices will be set based on crude prices, refining costs and taxes and a "reasonable profit" for refiners.

Soaring crude prices in the first half have pushed refiners deep into the red as the government capped fuel prices in an earlier effort to tame inflation.