China, world's second biggest oil consumer, has announced a hike in energy prices by up to 18 per cent to tame voracious domestic demand and bring relief to its refineries reeling under losses but fraught with risks of stoking the already rising inflation.
In the first increase in last eight months and highest in recent years, the government-regulated retail prices of gasoline were raised by 16 per cent and diesel 18 per cent, a step that is expected to impact world oil market where crude oil prices had touched $140 per barrel.
Beginning midnight last night, the benchmark gasoline and diesel prices went up by 1,000 yuan ($144.9) per tonne, the state media said, quoting the country's top economic planner, the National Development and Reform Commission.
The aviation kerosene price was also up by 1,500 yuan per tonne but the prices of natural gas and liquefied petroleum gas were left untouched.
The commission said the oil price adjustment was made to ensure supplies in the country by reducing the gap between continuously rising international crude prices, especially since February, and the state regulated domestic oil prices.
Government-controlled oil prices in the domestic market was blamed for shortfall of supplies as some refineries cut back on or stopped processing to avoid losses, the state-run Xinhua news agency said quoting an unidentified official.
"The increase in the prices will benefit domestic oil companies," NDRC said.
Squeezed in between soaring international oil prices and relatively low regulated price at home, China's oil refineries had suffered huge losses. The country's largest refinery, Sinopec, incurred a loss of more than 20 billion Yuan in its refining business in the first quarter of this year.
