Gas and diesel cost more from today

Gasoline will cost 0.8 yuan (12 cents) and diesel¹ 0.92 yuan more for a liter from today, and electricity charges for commercial units will go up by 0.025 yuan ($0.4 cents) per kWh from July 1.

The price of aviation fuel has been raised, too, by 1500 yuan ($217) a ton, said the National Development and Reform Commission (NDRC).

The prices of natural gas and liquefied petroleum² gas (LPG), however, remain unchanged.

Urban and rural residents and the farming and fertilizer production sectors³ have, however, been exempted⁴ from the increased electricity charges. Areas in Sichuan, Shaanxi and Gansu hit by the May 12 quake too have been exempted, the NDRC said.

The government was forced to raise oil prices from midnight last night, the first time in eight months, because of the soaring price of crude in the international market.

The move is expected to bring some relief to domestic refineries⁵, which have been reeling under losses, and ensure a stable supply of oil in the market. "The increase in the prices will benefit domestic oil companies," the NDRC said in a statement yesterday.

The price of crude oil in the international market has crossed $130 a barrel. The price of crude is linked fully⁶ with the international market in China, while prices of refined petroleum products are still controlled by the government.

Because of the big gap between the high crude price abroad and the relatively⁷ low price at home, China's oil refineries have suffered huge losses.

The country's largest refinery⁸, Sinopec, incurred⁹ a loss of more than 20 billion yuan in its refining business in the first quarter of this year.

The largest oil company, PetroChina, saw its net profit fall by more than 30 percent in the first three months, with losses in its refining wing being the biggest contributor.

Analysts¹¹ said the high consumer price index (CPI) in recent months had been a deterrent¹² for an increase in oil prices.

The country's CPI, the main gauge¹³ of inflation, rose 8.5 percent year-on-year in April. It was 8.3 percent in March and a nearly a 12-year-high of 8.7 percent in February.

It, however, dropped to 7.7 percent in May, paving the way for the government to increase oil prices, an analyst¹⁰ said.

But increased oil prices could push up the rate of inflation, said Zhou Dadi, vice-director of the China Energy Research Society.

The government will also raise the electricity tariff¹⁴ to prevent power companies from incurring¹⁵ further losses.

The price of coal will be brought under government control temporarily, the NDRC said, because the soaring coal price is the main factor behind higher electricity charges.

An increase in the power tariff will help the development of desulfurization equipment in power plants, and renewable energy sources such as wind power and biomass power, the NDRC said.

The power tariff increase will not create a big impact on the CPI because urban and rural residents have been exempted.