China's finished oil price was raised at 0 am August 25. Regarding this Deng Yusong, fellow researcher at the Research Institute of Market Economy of the Development Research Center (DRC) of the State Council, said the oil price hike would have impact on the price level, but it would be limited.

According to the Economic Information Daily oil price in the international market keeps on rising recently. Since August oil prices have once topped $49 per barrel and approached $50. Pressured by this China raised the prices of finished oil at 0 am August 25. The prices of gasoline and diesel were raised by 240 yuan and 220 yuan respectively. Retail prices were raised by the same amount according to the adjustment of the factory prices.

The oil price hike would have impact on certain industrial prices, said Deng Yusong, but the impact would not be as big as that of grain price hike on the price level. Due to the existence of transmission mechanism in the oil industries the oil price hike would be internally digested and absorbed in the transmission process as the hike is gradually transmitted to the downstream industries, thereby reducing the impact of oil price hike on the downstream industries. Moreover the fiercer the competition in the downstream industries the greater the internal absorption is and the less impact it would have on the corresponding industries.

Oil price hike would directly raise transportation cost, stressed Deng Yusong, so the short-term impact of the oil price hike would mainly be reflected in transportation and the related industries such as the aviation industry, tourism industry and taxi industry.

Sometime ago some analyses pointed out that oil price hike would give rise to a new round of inflation in China. When asked whether the oil price hike would have inflation pressure on China Deng Yusong said one of the criteria of inflation is the CPI (consumer price index). The CPI is reached by comprehensively calculating the prices of a series of representative products and service items according to their different weights. In each type of price index the trait of structural price hike is particularly apparent.

Fore example, in consumer prices the weight of food prices is 33.6 percent. Food prices rose by 14 percent in June, which could pull up the consumer prices by 4.7 percentage points and contribute to 94 percent of the consumer price hike. Among various factors that affect the CPI the influence of oil price is relatively small. So the oil price hike would not bring about direct pressure on inflation. During the first half year prices of water, electricity and fuel increased by 4.6 percent whilst the general price level was pushed up only 0.25 percentage points.

Experts therefore said the oil price hike would not have a great impact on the price level. In general, domestic price level would possibly tend toward gradual falling back, but this would take some time.

By People's Daily Online