The jump in China's state-controlled fuel prices will inevitably squeeze consumers at both filling stations and grocery stores. But analysts say the hike is unlikely to make an immediate or huge dent in the country's hunger for oil. The price hike of up to 18 percent is likely to prompt refiners to boost production of crude oil, gasoline and other refined products. Previously, they had held back because they were losing money on the wide gap between global crude oil prices and state-set retail prices, which had created widespread fuel shortages. “Do not expect an immediate fall in China's oil imports - the price effect on demand will work in China as well, but it will take some time to work through,” Wang Tao, an economist for UBS Securities, said in a report issued Friday. Crude oil prices edged higher Friday in Asian trading - approaching US$133 a barrel on the New York Mercantile Exchange - after tumbling the day before on news the National Development and Reform Commission would raise prices for gasoline and diesel fuel by 16 percent and 18 percent respectively. Some analysts said the oil market may have overreacted to the news from China, with some traders buying oil futures on the belief that their climb will continue. “Whether domestic demand cools, or the price increase simply serves to bring more refining capacity on-line to satisfy China's voracious appetite, remains to be seen,” said Jing Ulrich, chairwoman of China equities for JP Morgan Chase & Co. Chinese drivers shrugged off the price hike as inevitable. “Maybe I might drive a bit less. But if it's for business, then if I have to drive, I will,” said He Ping, a trading company employee who was refilling his VW Jetta at a Beijing gas station. “It's not that big a deal,” he said. The government has been paying billions of dollars in subsidies to the country's two big state-owned refiners to make up for the losses. Many smaller loss-making refiners had shut down or cut back their operations. The government hiked fuel prices by about 11 percent in November but had kept them frozen at that level, seeking to avoid adding to inflation, which has touched 12-year highs since the beginning of the year. News of the price hikes lifted Chinese stocks Friday. The benchmark Shanghai index rose 3 percent, driven by a 6.3 percent gain in PetroChina and a 3.8 percent advance in Sinopec - the country's two big refiners. The hike raised the price of gasoline by 1,000 yuan (US$145) per ton to 6,980 yuan (US$1,015) - more than 16 percent - and diesel by the same amount per ton to 6,520 yuan (US$949) per ton - an 18 percent hike. Aviation kerosene rose by 1,500 yuan ($218) per ton to 7,450 yuan ($1,084), the commission, known as the NDRC, said on its Web site. To protect individual consumers, the government said it would not allow any increases in bus and subway fares or taxi fares. Natural gas and liquefied petroleum gas prices will remain unchanged, and subsidies to the poor and to grain farmers would increase, it said.
