China has decided to cut the price of gasoline by 220 yuan (about US$28) per ton as of Jan.14, the National Development and Reform Commission (NDRC) announced in Beijing on Saturday.

 

The factory price of kerosene for aviation will also drop by 90 yuan, the NDRC said in a circular released Saturday night.

 

The national development planner asked the two oil suppliers, China National Petroleum Corporation and China Petroleum and Chemical Corporation (Sinopec) to lower prices under the decision and guarantee supply of processed oil to meet market demands.

 

This is the second time in recent five years for China to lower the prices of refined oil. The last price cut was in May 2005 when international price declined.

 

China has raised the price for refined oil products 12 times since 2003, including twice in 2006.

 

The international crude oil price has been declining since last September after the price hit record high of over US$77 per barrel in last July.

 

New York Mercantile Exchange (NYMEX) prices for February delivery of light, sweet crude oil stood at US$51.88 per barrel on Thursday, the lowest since May 2005.

 

The decline of international price has prompted complaints of domestic refined oil consumers, who have been calling for price cuts, as well as proposals of experts who are expecting the launch of a pricing mechanism linking domestic refined oil prices more closely to its international counterparts.

 

As the domestic price regulator, however, the NDRC has kept refined oil prices relatively low compared with the international level, even when the prices on the international market were soaring.

 

The Chinese government has endeavored to map out a pricing system for refined oil in line with China's own conditions. However, the fluctuation of international oil price, which usually sees jump rather than decline, leaves little room for the government.

 

In March of 2006, China launched a preliminary move to lift refined oil prices, while setting up a mechanism to offer subsidies to disadvantaged communities and public service sectors and collect special fees from oil producers who sell domestically produced crude oil.

 

Experts said cutting domestic refined oil prices may offer opportunities to levy fuel oil tax, which was first proposed in 1994 and has been delayed for concerns that it would impose a burden on those who consumed more oil, such as bus and taxi drivers.

 

(Xinhua News Agency January 14, 2007)