China raised prices of petrol and diesel today seeks to contain inflation

China raised prices of petrol and diesel today for less than half of what crude oil has gained in the last month as the fastest growing economy in the world seeks to contain inflation.

The price of petrol will increase by up to 4 percent to 310 yuan (47 dollars) per ton and diesel by 300 yuan per ton, the National Development and Reform Commission said in a statement on its website yesterday, the third increase this year in oil in the world's second largest consumer. New York crude has gained 9 percent since China's last price increase on 26 October.

"This is a movement long overdue since the government is worried about inflation, while refiners are suffering losses after crude costs soared," said Wei, oil analyst at Bank of Communications International Holdings Co. in Beijing. "We believe the increase of 4 percent is far from sufficient to compensate for oil profits."

Inflation in China accelerated to 5.1 percent last month from a year earlier, the biggest jump in 28 months, driven by food costs. Chinese consumers are more concerned about rising prices at any time in the last decade, the People's Bank of China said on December 15 in its quarterly survey of 20,000 households across the country.

The decision to raise petrol, diesel and kerosene prices was taken after "careful consideration" in light of rapidly rising prices in general in China, said the NDRC. The adjustment is added 0.07 percentage points in the monthly index of consumer prices, he said.

Increase Delayed

"Crude oil prices in international markets this month reached the highest since October 2008," the commission said. "However, taking into account the evolution of prices and supply of refined oil products, the government made slow rising prices and limited its scale," the NDRC said in a question and answer published on its website.

The retail price of N90-grade gasoline will be allowed to increase to 0.23 yuan per liter of diesel and N0 up by 0.26 yuan per liter, the commission said. The cost of aviation fuel factory No. 3 will rise by 300 yuan per ton to 5,990 yuan.

China National Petroleum Corp. and China Petrochemical Corp., the country's largest oil companies, refineries and others to ensure that prices are not increased by more than the ceiling set by the government, said the NDRC. Local departments of the Commission will intensify the monitoring of fuel prices and end the hoarding and price fixing, he said.

Shares Gain

China Petroleum & Chemical Corp., the listed unit of China Petrochemical, rose 2.4 percent, the biggest increase since Dec. 13 to close at HK $ 7.39 in Hong Kong. PetroChina Co., whose parent is China National Petroleum, gained 0.3 percent to HK $ 9.94.

The government has made 13 adjustments since the introduction of a mechanism in December 2008 that allows the NDRC to review fuel prices when oil change costs more than 4 percent over 22 days. New York futures have risen 10 percent since Nov. 18 and were trading at $ 89.94 a barrel at 11:40 pm in Singapore.

High fuel prices may encourage refiners to increase production to alleviate a shortage of domestic supply. Chinese state oil companies are increasing the processing in an attempt to alleviate the shortage of diesel in the south and east as demand increases the farmers and factories.