New pricing system, not adjustments, will curb China’s oil demand

In the face of high inflation rates and an eventful year, China is unlikely to bring domestic pump prices in line with their higher international counterparts in the near future. Instead, if crude oil prices continue their bullish run, authorities are likely to continue adjusting fuel prices by small increments periodically, while subsidizing the worst hurt sectors, such as agriculture, fishing and transportation, and state-owned refiners that are producing oil products at a loss.

Under this scenario, the recent and future retail price adjustments will have no significant impact on China’s robust oil demand. In fact, rather than curbing demand, the country may see a jump in crude imports in the coming months as higher retail prices offer an incentive for state-owned refineries to resume or increase fuel production.

Interfax