Drivers across China rushed to fuel stations over the weekend to refuel their vehicles ahead of a significant but capped increase in retail gasoline and diesel costs. The hike, limited to roughly half of what the standard pricing mechanism would dictate, was driven by rising global oil prices linked to the US-Israeli conflict with Iran.
The National Development and Reform Commission (NDRC) announced on Monday that maximum retail prices for gasoline would rise by 1,160 yuan ($168) per metric ton and diesel by 1,115 yuan per metric ton, effective from midnight. Without intervention, prices would have climbed by 2,205 yuan and 2,120 yuan per metric ton respectively, the NDRC said.
“To cushion the impact, ease the burden on downstream users, and support economic and social stability, authorities introduced temporary controls within the existing pricing framework,” the state planner stated. The adjustments are the largest on record, pushing price limits close to those seen in 2022 following Russia's invasion of Ukraine.
Sinopec notified customers via text message on Sunday evening that fuel prices were expected to see a relatively large increase at midnight on Monday and reminded them to refuel outside peak hours. Drivers nationwide queued at gas stations on Sunday night, according to posts on Rednote and Weibo. A Rednote user in Shanghai posted a picture of a long line at a PetroChina station, suggesting drivers switch to electric vehicles as charging after 10 pm costs less than 50 cents per kWh.
Analysts estimate that a 10 per cent oil-price rise could lift Chinese producer price inflation, currently at minus 0.9 per cent, by 0.4 percentage points. However, Shuang Ding, chief China economist at Standard Chartered Bank, warned that pure cost-push inflation could squeeze corporate profits. The government's intervention will limit refiners' selling price increases, but high oil prices could still curb consumer demand, potentially deepening refining losses, according to GL Consulting.
Rising crude costs and weak demand have pushed independent refiners in Shandong province to near three-year low profits, with losses reaching 122 yuan per ton by March 20, Oilchem reported. Earlier high operating rates and weak demand, combined with an export ban on fuel products, had pushed gasoline and diesel inventories to temporary highs, GL Consulting added.
