China Raises Retail Fuel Price Caps Amid Iran War
China has raised regulated ceiling prices for retail gasoline and diesel by the most since March 2022, following a surge in international oil prices amid the U.S.-Israeli war on Iran. The move is expected to increase fuel costs for consumers.
The National Development and Reform Commission announced that gasoline and diesel retail price caps will increase by 695 yuan ($100.46) and 670 yuan ($96.84) per metric ton, respectively, from Tuesday. This marks the largest adjustment since March 2022, when prices rose by 640 yuan ($93.15) for gasoline and 620 yuan ($90.35) for diesel.
The increase in fuel prices is attributed to a surge in international oil prices, with Brent crude futures climbing 27% and West Texas Intermediate (WTI) futures rising 35.6% last week. China‘s state planner reviews retail gasoline and diesel prices every 10 working days and applies uniform adjustments nationwide, taking into account average processing costs, taxes, distribution expenses, and appropriate profit margins.
Fuel Exports Halted Amid War
China has asked refiners to halt fuel exports and try to cancel shipments already committed as the Iran war curbs refinery output. Several people with knowledge of the matter said on Thursday that China’s request is aimed at conserving domestic fuel supplies amid the uncertainty surrounding the conflict.
The move comes as international benchmark Brent crude futures had climbed 27%, and West Texas Intermediate (WTI) futures were up by 35.6% last week, according to Reuters data. The surge in oil prices has led to concerns about fuel availability and prices, particularly in countries heavily reliant on imported energy.
Fuel Price Adjustment Mechanism
China‘s retail gasoline and diesel prices are allowed to float freely between floors and ceilings. However, when international crude prices reach $130 per barrel, retail fuel prices are generally not raised or are raised only minimally. When crude prices fall to $40 per barrel or below, retail fuel prices are calculated as if crude were priced at $40, with normal processing margins.
The adjustment rate reflects changes in international crude oil prices while also taking into account average processing costs, taxes, distribution expenses, and appropriate profit margins. The mechanism aims to ensure that domestic fuel prices remain stable and aligned with global market trends.
Conclusion
China‘s decision to raise retail fuel price caps amid the Iran war is expected to increase fuel costs for consumers. The move is aimed at conserving domestic fuel supplies and ensuring stability in the energy market. As international oil prices continue to fluctuate, China’s fuel price adjustment mechanism will remain crucial in maintaining a balance between domestic fuel prices and global market trends.
Original Article: China makes biggest retail fuel price cap increase in four years amid Iran war | Reuters — Reuters