With oil firmly over $120 a barrel this week, Beijing responded by raising motor fuel prices on Thursday, the second time it has done so this year, writes Leslie Hook.
More significant than the rises, however, is their restraint. The threat of inflation is such that Beijing has kept motor fuels much cheaper than the basket of international crude oils it uses as its reference.
Prices are up roughly 5 per cent at filling stations across the country.
That means the cost of taking a truckload of vegetables from southern China to Beijing has increased by Rmb326 ($50); and your average Beijing taxi driver is paying Rmb13 ($2) extra a day for his fuel, according to calculations by oil analyst He Wei of Bocom International. Brent crude has risen 18 per cent since Beijing last raised pump prices on February 20. The international basket that China uses to determine domestic fuel prices has risen about 14 per cent. Indeed, pump prices in China have risen more slowly than the basket of crude prices since this pricing system was introduced in 2009, cutting refiners’ profits.