Thursday, September 30, 2004


China caps price of gasoline

This might be an amazing story. Giving almost no detail, the Australian Broadcasting Corp.'s Rural News reports,

The Chinese Government has capped the price of petrol, to insulate the booming economy from damage.

I cannot find another English-language reference to this anywhere. The world's most populous nation caps the price of gasoline and no one is reporting it?

Perhaps what is really meant here is that Chinese retail gasoline prices are not allowed to float. And ABC has just noticed it. That said, the ABC story makes it appear to be a new policy.

The closest I can come to any information on this is a Motley Fool column of August 26:

... unlike the U.S., the command economy in China means that the higher oil and gas prices at the wholesale level have not necessarily corresponded to higher retail prices. The state announced Tuesday that it would increase retail prices by 6% to respond to higher pricing -- refining margins in China have been deeply negative during the recent spike -- which is costly for the downstream companies such as Sinopec. Contrast this environment to the American one, where the CEO of refining giant Valero recently noted that this was the best refiners have had it in as long as he can remember....

China's industrial and consumer-driven boom is well documented, but as the government has been more concerned about inflation, it has not allowed retail prices to float.... [O]ne of the key factors that experts have blamed on higher petroleum prices worldwide is -- yep, you guessed it -- Chinese insatiability for oil, particularly because of the rise in automobile ownership. [emphasis added]

What the Motley Fool is saying about the Chinese oil economy, once you get past the jargon, is this: Chinese oil-producing companies are making out like bandits, but the refiners are losing out because of price controls.

More significant from an environmental perspective is that Chinese drivers are benefitting from the price controls and can still leave their bicycles in the garage. According to the Voice of America, "Official figures show nearly 14,000 new motor vehicles hit China's roads each day."

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