Posted on 06/19/2008 10:55:14 AM PDT by Brilliant
China raised retail gasoline and diesel prices on Thursday by up to 18 percent, a move that threatens to stoke domestic angst over decade-high inflation less than two months before Beijing hosts Olympics games.
The increase in regulated fuel prices, China's first hike in eight months and its sharpest ever one-off rise, sent oil prices down by as much as $3 a barrel as dealers bet it might help curb soaring demand.
However, U.S.-listed shares in top refiner Sinopec (NYSE:SNP - News) surged over 8 percent as the increase will aid their profits.
The rise shows China following its neighbors from India to Indonesia in bowing to the pressure of near $140 crude oil.
Most analysts had expected Beijing to hold off on an unpopular fuel price rise until after the Olympics in order to keep a leash on inflation, already at a near 12-year high.
"Global crude prices have been rising sharply and Chinese domestic fuel prices have lagged behind. The price difference has highlighted the contradiction between demand and supply," state television said...
Prices for gasoline and diesel prices will rise by 1,000 yuan ($145.5) per tonne each effective from midnight, state media reported on Thursday evening.
China's central bank governor, Zhou Xiaochuan, told reporters in Washington after two days of U.S.-China trade talks that, on fuel prices, "the direction of reform and the determination had always been there and the rest is timing."...
In Beijing and Shanghai, motorists queued for gasoline at petrol stations on Thursday night as word of the price hike leaked out. Police stood by at one Beijing petrol station.
At least one station told customers that it could not serve them until the price hike took effect at midnight, prompting an altercation between staff at the station and a group of angry motorists.
(Excerpt) Read more at biz.yahoo.com ...
But this is the part I liked:
China's central bank governor, Zhou Xiaochuan, told reporters in Washington after two days of U.S.-China trade talks that, on fuel prices, "the direction of reform and the determination had always been there and the rest is timing."...
I guess you have to give Bush credit for this, since it was the result of his trade talks.
About time! (Gas is down around 10 cents on the NYMEX)
You bet, they subsidize. Of course they do, it’s a tool for keeping stability. So what this says is that the pain of high energy costs is starting to be unbearable to the ChiComs. This should have a very negative effect on their economy. Their inputs are getting pricier, and the cost of transporting their goods to the consumers in the west is also very high. I personally have been shorting the Chinese markets for the last month.
China and India both were subsidising gasoline. India may still be doing it.
Comments on post #5?
Yes, India does it.
But if we’re talking about subsidies, nothing beats EU / Japan and US agricultural subsidies.
Indian fuel subsidies are for diesel fuel, used mainly for agriculture and public transport.
Thanks!
could somebody please post
the old and new prices
Both India and China are still doing it, just less of it. But they are beginning to realize that gas subsidies are costly, and I would expect both of them to move toward a free market over time.
| Increase | Ton | Weight | Gallons | Increase $ | Original $ | New $ |
| 145.5 | 2204.6 | 6.15 | 358.4715 | 0.40589 | 2.254944 | 2.660834 |
I was doing some rough calculations, and if I am close it looks like it is costing China about a trillion $ a year to subsidize its fuel.
is that 2.66 a gallon?
Yep... more or less. The weight of gas per gallon varies, and I used an average. I found numbers saying it was in the range of 5.8 to +/- 6.5 lb per gallon.
Close, the exact new prices are 6980 yuan per tonne for gasoline and 6520 yuan per tonne for diesel. At present exchange rate of 6.882 this means $1014.24 for gasoline and $947.40 for diesel.
At 30C this means the price is about $2.71 per gallon for gasoline and $3.09 per gallon of diesel.
Oil right now is at $132 per barrel, thats roughly 0.83 per liter. The Chinese refiners are selling for 0.72 per liter, so they are losing 0.11 cents per liter or if you prefer $17.49 per barrel.
China’s 2008 oil consumption I would estimate at roughly 8.5 million barrels per day, so this means about 3.1 billion barrels per year. That means the subsidies will cost about 54.26 Billion dollars this year. Quite costly, but not quite 1 trillion dollars. China’s GDP estimate for 2008 is is about 3.941 trillion dollars. Though it will likely top 4 trillion considering the yuan’s slow but steady appreciation. This mean’s China’s oil subsidy is costing about 1.37% of GDP, this is of course assuming oil prices remain constant for the remainder of the year.
Another similar sized price increase will bring Chinese oil prices back in line with the global average.
Thanks. It was hard to find accurate data so I swagged it.
That brings things into perspective.
See post 15 for accurate data. My price per gallon SWAG was close, but subsidy cost SWAG was way off.
I had read an article where a reporter was talking with a guy with a fancy SUV at a Chinese gas station. The guy figured that the price of gas would go up after the Olympics, as the gov’t wanted everything to be “cool” until then.
Seemed like a reasonable thought, so perhaps they are in more trouble than folks think trying to subsidize and fueling such huge increases in cars. I imagine the extra transportation and large equipment use in the earthquake devasted region is also taking a toll on their resources.
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