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Speaking in Chengdu on Monday, Chen Deming, vice minister of the National Development and Reform Commission, announced that China would soon alter its refined oil pricing mechanism as well as imposing a fuel oil tax.

The oil pricing mechanism, and any reform altering its structure, will be pegged to international oil price fluctuations although the adaptability of normal citizens will be taken into account, said Chen.

The mechanism exists to bring domestic refined oil prices in line with international equivalents.

The vice-minister has revealed that in order to sweeten the reform, subsidies would be attributed to certain sectors such as those related to food production, urban transportation, agriculture and forestry with low-income groups also receiving specific allowances.

Chen also announced the upcoming imposition of a new fuel oil tax.

To date, the Chinese government has only taken domestic conditions into account when endeavoring to set fair pricing for oil products. However, the rapidly fluctuating international market has left it with little option other than to revise this process.

In March 2006, China first attempted to raise refined oil prices, also creating a mechanism which would offer subsidies to disadvantaged communities and public service sectors whilst also levying fees from producers selling domestic crude oil.

The concept of a fuel oil tax, first touted back in 1994 but delayed ever since due to the excessive burden it would bring to bear on bus and taxi drivers, is being considered by experts as only being possible should domestic refined oil prices see a marked fall.

(Xinhua News Agency April 3, 2007)