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New oil pricing system fuels debate

(China Daily)
Updated: 2007-02-13 09:03

No official announcement was made, but the NDRC recently confirmed that the long-awaited new oil pricing mechanism has been in effect "for quite a while".

The new system, designed to balance supply and demand of major oil products in the country, falls short of the expectations of some analysts as there is "no substantial change from the old system".

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"The new system is derived from the same format as the old one, without any fundamental change at all. I do not pin too much hope on it being able to better adjust supply and demand," Zhou Dadi, former director of the Energy Research Institute under theNational Development and Reform Commission(NDRC), told China Daily.

Han Yongwen, secretary-general of the NDRC, China's top economic planner, was recently quoted by some Chinese media as saying a more flexible oil pricing system had been "stealthily" put into effect some time ago, designed to more effectively bring the local oil product price in line with the international one.

The NDRC was reportedly considering removing the price peg between local and international oil products and instead linking the local price to the global crude oil price.

The NDRC did not officially announce the new system. Han said domestic oil products had long been priced on the average international crude oil price, plus costs and profits for refineries.

Sinopec, Asia's top refiner, gave some clues as to what had actually happened.