The National Development and Reform Commission (NDRC) has ruled out a further reduction in the prices of gasoline and diesel, despite the fall in global crude prices.

The NDRC, which sets energy policy and fuel prices in China, said it would not lower the December ceiling of retail oil products.

The watchdog said it would not be able to reduce prices further as the current adjusted retailing prices are more or less on par with the US$80-90 per barrel manufacturing cost after refining by China's oil enterprises.

"We have no plan to readjust the retailing prices as the present prices are well reflected in the cost," an NDRC spokesman told China Daily yesterday.

In December, the commission had cut the retail price of gasoline by 0.91 yuan per liter, and diesel by 1.08 yuan. The reduction in retail prices followed a government announcement that it would cut factory gate prices for gasoline, diesel and jet fuel, and also impose a fuel consumption tax from Jan 1 onward.

The spokesman said the December price cut and ceiling are based on the averaged cost of US$80 per barrel. "We found there is no room for further retail price cuts at the national level," said the spokesman.

Han Xiaoping, senior analyst with China Energy Web, however, has a different viewpoint. "We still have room for cuts as the current crude prices are hovering around the 2003 and 2004 levels," said Han in a recent interview.

At that time, China's averaged retail oil prices stood at 4 yuan per liter while the averaged price now is around 5 yuan per liter. "So we can still cut the price by a maximum of one yuan if the crude prices are around US$40 per barrel," said Han.

The NDRC spokesman admitted that the growing stockpiles, due to declining oil demand brought by economic recession, have already forced retailing companies in many parts of China to reduce prices of various grades of fuel.

In Zhejiang and Shanghai, the retailing prices have been reduced to around 4.7 yuan per liter after many companies stopped operations. In suburban Beijing also several filling stations have cut fuel prices.

"The price cuts would spread to other filling stations in Beijing also as the capital has huge stockpiles," said Guan Qingyou, energy researcher, Tsinghua University.

The State-owned enterprise caretaker said PetroChina and Sinopec are in dire straits due to the rising stockpiles and dwindling demand.

Wang Xiaoqi, head of planning and development at the State-owned Assets Supervision and Administration Commission had earlier warned that Sinopec could incur refining losses of around 230 billion in 2008, as it cannot pass on the higher crude costs to consumers due to government curbs.

(China Daily January 13, 2009)