China will raise the retail prices of gasoline by 550 yuan (85.75 U.S. dollars) per tonne and diesel by 540 yuan per tonne starting Tuesday, the country’s top economic planner announced on Monday.
The benchmark retail price of gasoline will be lifted by 0.41 yuan per liter and diesel by 0.46 yuan per liter, according to a statement posted on the website of the the National Development and Reform Commission.
The price hike, which marks the second such increase in a month and the fourth this year, comes amid rising pressures for the country’s refineries as increasing global crude prices keep driving up their operation costs.
Under China’s oil product pricing system introduced in 2009, domestic fuel prices may be adjusted when average prices of Brent, Cinta, and Dubai change by more than 4 percent over 22 working days.
China last raised fuel prices on August 10, following three consecutive cuts between May and July.
The price hike will help trim refining losses at oil companies. PetroChina’s refining business lost 23.31 billion yuan during the first six months of 2012, according to the company’s first-half report.
Sinopec, the country’s largest oil refiner, reported refining losses of 18.5 billion yuan during the first half, compared with 12.17 billion yuan in losses suffered in the same period last year.
The country sometimes postpones fuel price hikes due to inflationary concerns. “Inflation remains at a relatively low level, which provides the government with leeway to raise fuel prices,” said Yu Xiaofeng, analyst at the Beijing Petroleum Exchange.
Yu estimated that the price increase will push up inflation by less than 0.02 percentage points.
China’s consumer price index (CPI), a main gauge of inflation, rose 2 percent year on year in August, accelerating from a 30-month low of 1.8 percent in July, official data showed.
Although the fuel price increase will have limited impact on the CPI, consumers and companies will have to pay more for their fuel.
The logistics sector will be most affected. As transportation fees account for 70 percent of total costs in logistics, it will see a nearly 2-percent increase in costs after the hike, according to Yu.