Chinese ministry rules out sudden fuel price hike

BEIJING,May 9-- The government ruled out
any immediate increase in fuel prices on Friday despite increasing market
speculation about a possible hike, top pricing officials said.

Officials at the National Development and Reform
Commission (NDRC) said the recent oil price rise on the global market indicated
that the domestic fuel prices should be raised.

But Xu Kunlin, deputy director of NDRC's pricing
department, told a news briefing on Friday that the authorities would only
increase prices after further careful consideration.

According to the fuel pricing mechanism announced on
Friday, China will adjust its fuel prices when global crude oil costs fluctuate
more than 4 percent over 22 straight working days.

The global crude oil price has been increasing since
March, rising from 35 U.S. dollars a barrel to around 58 U.S. dollars on
Thursday.

This was the first time the government made public
its fuel pricing mechanism since it announced last December that it would link
domestic gasoline and diesel prices to the international market.

Xu said many oil traders had engaged in speculative
dealing in recent days amid rumors of a price hike. "To prevent speculative
trading, we will not adjust oil prices exactly in line with the benchmarks set
in the regulation."

"And of course, we will not increase the prices today
(Friday) so that they can profit from speculation," Xu said.

The government raised the benchmark retail price of
gasoline by 290 yuan (42 U.S. dollars) per ton, or 5 percent, and diesel by 180
yuan per ton, or 3.7 percent, on March 25.

Xu said the price revisions show the new pricing
mechanism that took effect on Jan 1 means the government can respond accordingly
to international oil price changes.

He said the government would take the global economic
situation into account when deciding the adjustment of oil prices. "For example,
if the U.S. economy continues to worsen and oil prices come down, we will not
increase prices in the short term."

To prevent speculation, Xu ruled out announcing the
timing of oil price adjustment in advance. "I don't think we need transparency
in this regard."

Cao Changqing, director of the NDRC pricing
department, said the Chinese government has tracked the trend of several oil
markets worldwide.

China only monitored the oil price in Singapore in
the 1990s. "We've learnt a lesson from that because that created many massive
profit-making opportunities for speculators," he said.

PetroChina said on its website that China's
ex-factory gasoline and diesel prices are linked to the prices of Brent, Dubai
and Cinta crude oil, and it will also take into account transportation,
processing, tax and refining costs.

(Source: China Daily)