China will not cut its domestic retail fuel prices when international oil prices fall below 40 U.S. dollars a barrel, the country's economic planner said on Wednesday. Previously, China set a ceiling for domestic retail fuel prices, which will not be raised if international oil prices rise above 130 U.S. dollars per barrel.
The floor and ceiling aim to buffer the negative effects of violent fluctuations in international oil prices, according to the National Development and Reform Commission (NDRC). Since the second half of 2014, global oil prices have experienced sharp changes, prompting China to improve its pricing mechanism for oil products, it said.
The price ceiling aims to protect consumers' interests, while the price floor can safeguard oil supply, said Dong Xiucheng, a professor with China University of Petroleum - Beijing. The latest reforms improved China's oil pricing mechanism, which was introduced at the end of 2008 and amended in 2013.
Following the new rule, the NDRC on Wednesday announced cuts in the retail price of gasoline and diesel from Thursday. Gasoline prices will drop by 140 yuan (21.34 U.S. dollars) per tonne, while diesel prices will go down by 135 yuan per tonne.
The NDRC has suspended price adjustments of domestic refined oil products twice since Dec. 15, awaiting the changes. Despite the economic slowdown, China's crude oil imports rose 8.8 percent from the previous year to 336 million tonnes in 2015, according to the General Administration of Customs (GAC) on Wednesday.
China is a major oil importer and consumer, importing nearly 60 percent of what it uses. Global oil prices have tumbled to around 30 U.S. dollars a barrel, dragged down mainly by a global supply glut and a strong U.S. dollar.
Under the updated mechanism, China will adjust domestic prices of refined oil products when international crude prices translate into a change of more than 50 yuan per tonne for gasoline and diesel for a period of 10 working days, but will not do so if the international prices go below 40 U.S. dollars or above 130 U.S. dollars a barrel.
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