How China sets fuel prices

(January 21, 2016)

The retail fuel market in China is not fully liberalized. The petroleum products prices are controlled by a local regulator, The National Development and Reform Commission (NDRC). The NDRC adjusts fuel prices based on the development of crude oil prices on the international markets and the domestic economic conditions. The current pricing mechanism was adopted in March 2013. According to it, retail fuel prices are reviewed every 10 days and adjustment is undertaken only if the average price of a basket of crudes has changed by more than 50 yuan per tonne (until March 2013 the adjustment period was 22 days).

In January 2016, the NDRC announced a new amendment to the pricing policy. Now, pricing adjustments will be suspended if the international crude oil prices drop below 40 USD per barrel or rise above 130 USD per barrel. The aim of the price floor is to counter the growing consumption of petroleum products and the worsening air pollution in the country.

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