China may Reduce Fuel Prices Due to Crude Oil Price Decline

Data from a commodity information provider based in China showed that China, the number two oil consumer in the world, may think of reducing gasoline prices and diesel costs for the third time this 2012 after a set of declines in crude oil prices reached the trigger point that Beijing utilizes to assign fuel prices.

However, the government is likely to not push through with that decision until the early parts of July, almost one month after the last reduction in Beijing, on June 9, under the present review period of 1 month.

Brent crude oil prices recently fell below $96 per barrel to stay close to the low levels it reached in the past sessions.  The decline was mostly caused by concerns over the debt problem of Spain that lingered prior to the result of a policy meeting of the United States Federal Reserve.

A group called C1 Energy is attempting to predict the pending decision of the National Development and Reform Commission. In China, the NDRC is responsible for setting the cost of fuel.

According to the C1 Energy data, the recent moving average cost within a period of 22 days of Dubai, Cinta and Brent crude was lower by 4.2 percent compared to its level on June 7. That went beyond a trigger point of 4% that the government set.

According to the NDRC, it is thinking of altering the cost of fuel if average oil prices increase or decline by 4%. It also considers other factors, like supply and demand for consumer fuels, as well as inflation.

But the organization have not revealed its daily computations or clarified as to exactly which crude oil blends are utilized since they introduced the formula of their pricing in 2009.

China has been thinking of changes to the present scheme on fuel pricing to reflect refining expenses better. It also has plans to decrease the trigger level, cut the period of review and alter the basket of crude composition where gasoline prices are linked.

By: Chris Termeer