CHINA is considering increasing the frequency of fuel price adjustments, and dropping a 4 percent trigger point, as part of plans to reform its pricing mechanism, the top planning official said yesterday.
Under the current system, the government can adjust fuel prices if the 22 working days' moving average of Brent, Dubai and Indonesia's Cinta crude benchmarks rises or falls more than 4 percent.
"The period is too long," Zhang Ping, director of the National Development and Reform Commission, which sets energy prices in China, said in Beijing.
The NDRC plans to shorten the period and remove the 4 percent trigger so fuel prices can better reflect changes in the global crude oil markets, he said.
The drawbacks of the current mechanism became evident last month when the NDRC raised fuel prices on the mainland while, the same day, Taiwan reduced them.
The NDRC raised prices to reflect higher crude rates despite a retreat in the days prior to the adjustment. CPC Corp, Taiwan's oil company, reviews rates weekly.
The simultaneous changes underscored the need for an improved pricing mechanism.
A new mechanism is expected to cut the 22 working days period to 10, according to analysts and industry officials. It may be unveiled after the National People's Congress, analysts at Sanford C. Bernstein said.
ICIS C1 Energy expects there still to be a limit in fuel price changes to reduce the impact on motorists if crude rates surge.
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