Mitigating the impact of rising international oil prices and ensuring stable supply — An analysis of this round of gasoline and diesel price adjustments

Xinhua News Agency, Beijing, April 7—Headline: Easing the Impact of Rising International Oil Prices to Ensure Stable Supply—An Interpretation of This Round of Gasoline and Diesel Price Regulation

By Xinhua News Agency reporters Wei Yukun and Wei Hongyi

The National Development and Reform Commission issued a statement on April 7. According to the refined petroleum product price mechanism, effective from 24:00 on April 7, domestic gasoline and diesel prices should be raised by 800 yuan per ton and 770 yuan per ton, respectively. After regulation, the actual adjustment will be 420 yuan and 400 yuan.

Experts said that since the domestic refined petroleum product price adjustment on March 23, international crude oil prices have fluctuated sharply. To mitigate the impact of rising international oil prices on the domestic market, the state has continued to take measures to regulate refined petroleum product prices.

Lü Zhichen, deputy director-level official of the Price Cost and Certification Center under the National Development and Reform Commission, said that the maximum retail prices for gasoline and diesel in this round should be raised by 800 yuan and 770 yuan per ton, respectively. In practice, they are raised by 420 yuan and 400 yuan, respectively—less than the planned increase by 380 yuan and 370 yuan. In terms of retail prices, 92-octane gasoline is adjusted to rise by 0.31 yuan less per liter, and No. 0 diesel is adjusted to rise by 0.32 yuan less per liter. Preliminary estimates show that filling up a tank in a private car would cost about 15 yuan less; filling up a tank in a large truck would cost 150 to 200 yuan less.

Why, after taking regulatory measures, are refined petroleum product prices still being raised?

Dong Xiucheng, a professor at the University of International Business and Economics, said that the intensity of the state’s price regulation of refined petroleum products needs to be considered comprehensively together with multiple factors such as ensuring market supply security and the ability of downstream users to bear costs. The approach should both avoid imposing too large an impact on downstream users from abnormal price fluctuations, and also appropriately manage and channel the cost of crude oil imports to ensure stable supply of refined petroleum products.

If international crude oil prices rise sharply in the future, what regulatory measures will the state take?

The domestic refined petroleum product pricing mechanism stipulates that the maximum retail prices for gasoline and diesel are adjusted once every 10 working days, based on changes in the average international crude oil prices in a basket.

Lü Zhichen said that the refined petroleum product price mechanism sets an upper regulatory limit of $130 per barrel. If the average international crude oil price in the basket continues to rise sharply and exceeds $130 per barrel (which corresponds to the average retail price of domestic 92-octane gasoline being slightly above 10 yuan per liter), then for the portion above the upper limit, the maximum retail prices for domestic gasoline and diesel will not be raised or will be raised by less.

Dong Xiucheng said that, for example, during the period in 2022 when the Russia-Ukraine conflict caused a sharp rise in international crude oil prices, according to the refined petroleum product price mechanism, the state had clearly stated that once the international crude oil price broke through the $130-per-barrel regulatory upper limit, domestic refined petroleum product prices would no longer be raised in the short term (no more than two months), and that stage-based subsidies would be provided to refining enterprises.

The reporter learned from the National Development and Reform Commission that the Commission will guide refined petroleum product production and sales companies to do their utmost to arrange the production and transportation of refined petroleum products, ensuring stable market supply. It will also work with relevant departments to intensify market supervision and inspection, strictly investigate and punish illegal and noncompliant behaviors such as failing to implement the state’s price policies, and earnestly safeguard market order and protect the interests of consumers. (End)