A higher domestic oil price would benefit China's aim to reduce energy consumption and greenhouse gas emissions, Cao Changqing, an official with the National Development and Reform Commission (NDRC), said on Thursday, in the clearest indication yet that the government is considering raising the price of oil.

Despite soaring international oil prices, domestic oil prices have been kept 25 percent lower, which has failed to reflect the scarcity of energy resources and has led to enormous waste, according to Chen Qingtai, a researcher with the Development Research Center of the State Council.

Dong Xiucheng, a professor with the China University of Petroleum, said earlier this year that "it was impractical for China to advocate saving energy and reducing emissions without reforming domestic energy prices." "As the gap between domestic and international prices is widening again, domestic oil refineries face higher production costs," said Cao.

International oil prices will remain high in the latter half of the year, lifting the annual average price to US$65 per barrel for the full year, according to a recent forecast from the Ministry of Commerce.

But China is in a dilemma because raising oil prices will add to the burden on downstream firms and on other sectors - including transportation and manufacturing, said Cao.

Keeping oil price reform within the economy's capacity to adapt to it, the government will ensure a sufficient oil supply, continue to subsidize oil refineries and try to strike a balance between the reform and economic stability, he added.

(Xinhua News Agency July 27, 2007)