China cuts fuel price, raises tax

Park Sae-jin Reporter() | Posted : December 19, 2008, 07:48 | Updated : December 19, 2008, 07:48

A man looks at women playing cards at a stock brokerage house in Shenyang, northeast China's Liaoning province, Wednesday, Dec. 17, 2008.

China cut prices for gasoline, diesel and jet fuel Thursday, giving a break to Chinese companies and motorists as they struggle with a worsening economic downturn.

The price of diesel will fall by 18 percent while the price of gasoline is cut by 13.8 percent, effective Friday, according to the
country's planning agency, the Cabinet's National Development and Reform Commission. Jet fuel prices will fall by 32 percent.

The cuts will help trucking companies, airlines, factories and others that are being squeezed by high fuel prices and a slump in sales.

The price cuts come as Beijing is trying to revive falling economic growth but the announcement made no mention of a link with its stimulus measures. It said prices were cut to reflect a decline in global oil costs.

The cut in jet fuel costs should be especially welcome for Chinese airlines, which are suffering heavy losses as demand plummets. Two major state-owned carriers have received government aid to help them through the slump.

Oil prices fell to 4 1/2-year lows Thursday in electronic trading on the New York Mercantile Exchange. The January contract sank as low as $39.19 a barrel - down sharply from a peak of nearly $150 a barrel in mid-July.

Beijing has used its system of government-set energy prices to shield its public from surging global crude prices. Regulators restrained price increases, forcing state-owned oil companies to absorb losses as crude costs soared. Prices were gradually to curb soaring consumption but Beijing worried about the impact on the poor.

In the latest move, the price of gasoline will fall to 5,580 yuan ($818) per metric ton, while diesel falls to 4,970 yuan ($782) per ton, the government said. Jet fuel will fall to 5,050 yuan ($740) per metric ton.

The official Xinhua News Agency said gasoline would fall by 0.91 yuan (13 U.S. cents) and diesel by 1.08 yuan (16 cents) per liter. But it did not say how that would apply across the range of prices for arious grades of fuel or in different parts of the country. The top grade of gasoline in Beijing cost 6.78 yuan (99 cents) per liter, or $3.76 a gallon, before the price cut.

The announcement gave no breakdown of how that would translate into prices per liter (gallon) for various grades of gasoline. Also Thursday, the government announced a rise in fuel taxes to take effect Jan. 1, but they appeared to be small enough that consumers still should see significant savings.

The tax on gasoline will rise by 80 Chinese cents (11 cents) to 1 yuan per liter (14 cents) per liter, while the tax on diesel will rise by 70 Chinese cents (10 cents) to 80 Chinese cents (11 cents) per liter, the government said.

The agency's chairman, Zhang Ping, said earlier the change is meant to reflect road use by shifting the financial burden to those who drive more.
By Joe McDonald (AP)

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