The NDRC is studying a new fuel pricing scheme to better accommodate global fluctuations.
Zhang Ping, head of China's National Development and Reform Commission, has announced the organisation is assessing new methods of calculating the nation’s fuel prices. According to Zhang, the two areas in need of improvement are the 22-working-day cycle and a four percent fluctuation quota, which rely on Brent, Dubai and Cinta prices.
“The current mechanism fails to timely reflect the volatility in global oil prices,” said Zhang. This is apparently exerting pressure on the nation’s refiners and their profit margins. Zhang gave no details of possible alternatives to the current model. The announcement came after a gasoline price hike in February drew attention to the inflexible pricing model.
A newer model with a shorter working cycle and lower fluctuation quota would allow state-owned oil companies to react to global fluctuations faster, although greater fluctuations in fuel costs could disrupt the market - something that China’s stability-oriented government is keen not to do.
Some are sceptical the reforms will take place. In 2011, just three years after the current system was introduced, Zhou Dadi, a director at the NDRC’s Energy Research Institute, claimed the system was “too rigid” and that it did not properly reflect changes in the market. Calls for reform were made, however a new system failed to materialise.