China raises fuel prices by 16.7 percent
China raised fuel prices by 16.7 percent Thursday in order to cope with the rising cost of oil. The increase in regulated fuel prices is China's first hike in eight months and its sharpest ever one-off rise. The move eased global crude oil prices, which dropped $5. The 16.7 percent increase takes the pump rate for gasoline to about 75 U.S. cents a liter, still a quarter cheaper than in the United States and about one-third what UK motorists pay. Prices have doubled since 2003, but crude has more than quadrupled.
China's neighbors had been asking for this raise by scaling back subisidies, but the general thought was that Beijing was holding back on these measures for the sake of avoiding social unrest during the Olympic Games in August. China's rapid growth is considered one of the main reasons for oil's surge from $20 a barrel six years ago to the current record high of nearly $140.
[Source: AOL Money]
Reader Comments (Page 1 of 1)
Mike Z 11:46AM (6/20/2008)
Actually, there is an argument that this move will increase Chinese oil demand, not reduce it. This is because the price increase will help to abate recent fuel shortages in the country and as a result increase the amount of fuel consumed.
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dodgeviper88 11:48AM (6/20/2008)
How typical, blaming China for everything, but all the investors are foreign, especially the US. How hypocritical of them
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GoodCheer 12:02PM (6/20/2008)
"This is because the price increase will help to abate recent fuel shortages in the country and as a result increase the amount of fuel consumed."
Um, does this make sense? The fuel shortages are due to ALL AVAILABLE fuel being bought... if the shortages are abated, is it not because NOT ALL available fuel is being bought... ie. less is being bought?
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armmat 12:58PM (6/20/2008)
I'm with #2:
Yes indeed...it's all Venezuela's, Iran's, Iraq's, Saudi Arabia's fault...and now China's.
Never mind that all the crap we buy is made in China because US companies are too cheap to make them here in the US. Never mind that we funded, built, and operate most of the oil wells, machinery, etc in the middle eastern oil fields and South America.
Never mind we've stuck our fingers up everyone's asses for the last 60 years....
And then douchebags like Guilliani are too dumb to realize why we are hated and people are sick of us...
Yeah...it's because they hate our "freedom"....
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Tonesmoke 1:27PM (6/20/2008)
@3 per CNBC, refiners in China have been losing money refining because consumer oil prices are government regulated so they are under producing to minimize losses. Now they may make a profit so they will produce more to meet demand. They haven't had a shortage of oil, they just haven't been producing gasoline or diesel to meet demand because they were losing money to do so.
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Cervus 1:37PM (6/20/2008)
And here I thought that subsidizing gasoline was a bad thing because we should pay the full cost of the environmental damage. I guess it's okay when China does it.
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Kardax 1:50PM (6/20/2008)
China's refineries were operating at reduced capacity to limit losses caused by the fixed gasoline prices enforced by the government. When the government raised that price, it became possible for the refiners to operate profitably again.
Now that they can make a profit, they'll won't hold back on gasoline production anymore. This will alleviate their local shortage problems, but also increase their oil demand.
Oil investors are realizing this, which is why the prices bounced back up another $4 today.
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Kardax 1:51PM (6/20/2008)
Weird.... some of these other messages didn't show up until I posted mine...
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Tonesmoke 1:55PM (6/20/2008)
Kardax, funny same thing happened to mee too. I refreshed the page after posting and seeing my post and it disapeared for awhile.
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Serge 6:35PM (6/20/2008)
How did you guys figure that Chinese refiners will return to profitability with this retail price increase? The AOL article mentions "getting an immediate boost," which likely means an increased cash flow, not the profitability.
Interestingly, based on the picture attached to this article, a gallon of regular in China retails for 4.39 yuan * 3.78 l * 0.145 $/yuan = $2.40. With crude around 135$/bbl I doubt they are making money, just loosing less.
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stevefazek 6:55PM (6/20/2008)
The demand from China over the past 10 years have put a 1% growth on world oil production.
India's oil growth has been less than 1% in world oil use.
Investors have increase demand much more then that. in fact oil demand growth for contracts with delivery refused has outpaced growth where the contracts accept delivery 15 to 1.
So yeah the price of oil above 60 bucks a barrel is ALL investors.
Its so bad that OPEC,EU,China, sadly not the US are talking about kicking out the investors.
Where only oil consumers can bid on the price per barrel.
There is a supply shortage in the US. we are down by a few million barrels in our inventory only because the refineries know oil is way over priced and wont fill up.
Its not a problem because the refineries are running quit a bit lower then last year.
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Ping 7:34PM (6/20/2008)
Mr. stevefazek, the world can only produce so much oil. the reason gas prices are so high is just as you said, despite China's surging demand for oil, world oil production has only grown 1%, leading to a growing disparity between supply and demand. Because the world can only use as much oil as it produces, prices rise to reign in demand.
Do not blame investors, they are not the reason gas prices are rising.
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mike baz 6:25AM (6/21/2008)
Let's not forget inflation. Since the now melting dollar broke its bond with gold in '71, its effective backing has been that it was the only currency that oil could be traded in. That bond, that gave the dollar backing, is now ebbing away, and the dollar now looks like over an valued fiat currency. Before Saddam was taken out, he was threatening to sell Iraq's oil in Euros. Some nations now are. What will happen if all nations stop trading for oil in dollars? What will these nations do with their massive dollar reserves? Buy "phantom" American goods?
How's about buy America period.
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