From June 20, the prices for gasoline and diesel were raised by 1,000 yuan ($144.9) per ton and the price for aviation kerosene was up by 1,500 yuan ($217.4) per ton. Compared with the huge losses of oil refiners, this rise is quite limited. Further hikes would be necessary to balance their losses.
It has been urged repeatedly to raise the refined oil product price in the country, but the authorities did not act accordingly till now and the rise is not as dramatic as expected. They have good reasons for doing so: raising prices of refined oil products is like pouring oil over the already-strong flame of inflation in the country.
As the consumer price index (CPI), the foremost indicator of inflationary pressure, has kept growing dramatically in nearly one year, it is a primary concern of policymakers to curb inflation. Maintaining the price of refined oil products is an important aspect in easing this pressure.
As a matter of fact, the price hike should have been decided long before June 20. The earlier and the more the price is lifted, the more benefits would be achieved for the Chinese economy and the domestic capital market. The negative influences would be strengthened as the price rise is delayed.
Researchers said before the latest price rise the central government should give 330 billion yuan as subsidies to oil refiners every year to ensure the supply of refined oil products on the market. This amount is based on an international oil price of $130 per barrel. If the international oil price keeps going up, the losses of the refiners from refining imported crude oil would be boosted and the subsidies might be raised accordingly.
When the price of refined oil products are raised, the refiners could see less deficits and the government could reduce subsidy to refiners and use the saved money for other public services. Such a prospect is definitely constructive to economic soundness.
