FUEL is 4 percent cheaper at Shanghai's pumps today after the first price cuts under a new pricing mechanism introduced last month that links fuel prices closer to crude costs.
The ceiling retail price at city gas stations for 93-octane gasoline is now 7.43 yuan (US$1.2) a liter from 7.74 yuan while 97-octane gasoline has dropped to 7.90 yuan from 8.24 yuan. Zero-grade diesel now sells for 7.31 yuan, down from 7.65 yuan.
Pump rates vary from province to province. Shanghai's rates are among the highest in part because of higher fuel standards.
Nationwide, gasoline prices have been cut by 395 yuan per ton while diesel was cut by 400 yuan per ton to reflect lower crude rates in the global market, the National Development and Reform Commission, which sets energy prices in China, said. That represents cuts of 4.24 percent and 4.7 percent respectively, according to consultancy ICIS C1 Energy.
China's new pricing system cuts the price adjustment cycle from 22 working days to 10 days and removes minimum thresholds when crude prices change. Still, prices will not be adjusted if the resulting fuel price changes are less than 50 yuan per ton.
On April 10, the NDRC kept prices unchanged in the first review under the new mechanism because changes in global crude markets were not enough to justify any change.
The commission next reviews prices on May 10.
C1 Energy estimated the global average weighted crude prices had fallen 5.94 percent by yesterday since the previous fuel adjustment.
The government launched the new mechanism as part of efforts to make fuel prices more market-oriented, a move analysts say will improve profit margins in refining for oil majors such as Sinopec Corp and PetroChina Co. It could also reduce speculation in the fuel market.
Under the old mechanism, domestic fuel rates were not adjusted in a timely manner over inflation concerns. That had caused losses in the refining industry at times when crude rates rose fast.
Chen Qing, an analyst with energy consulting website chem99.com, expected the lower gasoline and diesel prices to reduce costs by about 3.1 percent for the transport industry and 2.15 percent for the logistics sector, Xinhua news agency reported.
