China raised prices for fuel by as much as 18 percent on Friday in a move that could cool the nation’s surging energy consumption. Cars line up at a PetroChina gas station ahead of expected price increase in Chengdu, China.
Demand for the energy needed to fuel China’s booming economy has contributed to unheard of prices for a barrel of oil. Light, sweet crude for July delivery fell $3.10 to $133.58 a barrel.
In an announcement issued late Thursday in China after local financial markets were closed, the National Development and Reform Commission (NDRC) said prices of gasoline and diesel oil would rise by 1,000 yuan ($145) per ton to 6,980 yuan ($1,015) and 6,520 yuan ($949) , or 16 percent and 18 percent, respectively.
Aviation kerosene will rise by 1,500 yuan ($218) per ton to 7,450 yuan ($1,084), the commission, known as the NDRC. Electricity prices will also rise for most businesses by 0.025 yuan (0.0036 cents) per kilowatt, although residential housing and the farming and fertilizer industries would be exempt, the planning agency said.
Earlier this week, the NDRC said it would look for an opportunity to adjust oil product prices, prompting a rally in shares for major refiners that have been swallowing huge losses due to soaring crude oil prices.
In an explanatory note accompanying the announcement, the commission said soaring oil prices had created “contradictions in the purchasing price of oil being higher than the selling price of refined products that were becoming more glaring by the day.”
That had led some refiners to halt or suspend production, bringing supply interruptions and long lines at some filling stations, the NDRC said. An “appropriate rise” in the price of refined products would “be beneficial to alleviating the difficulties enterprises were having in managing production,” it said. That would also boost domestic output of such products, ensure supply, and “promote the conservation of energy resources,” the commission said.
The American depository receipts for PetroChina, a state-owned oil company, jumped more than 4 percent, or $5.82, to $140.35 after the announcement. China Petroleum & Chemical Corp., or Sinopec, Asia’s biggest refiner by capacity, rose 3.3 percent, or $1.35, to $42.18.
China National Offshore Oil Corporation, or CNOOC, which is not as heavily involved in the refining business, fell $3.10 to $165.36. Coal prices that have risen 80 yuan ($12) in the past two years have created massive losses for four out of the country’s five major power producers, it said.
Along with the electricity price rise, the government would also continue to provide subsidies to the industry to guarantee supply, the NDRC said.
Also contributing to a decline in the price of oil Thursday, Iraq’s oil ministry said it was close to signing oil service deals with several major Western oil companies in an effort to boost its output capacity.
The deals, once signed, are something of a stopgap measure to help Iraq begin to increase production until the country is able to approve a new national oil law – now held up by political squabbles among Sunnis, Shiites and Kurds.
The Minister of Energy Sam Bodman said at a press conference in Jeddah (Saudi Arabia) that high oil prices are primarily caused by insufficient production, not speculation in the market. Saudi Arabia, which is currently the largest oil exporter in the world, can increase production “black gold” to