China Set to Raise Fuel Prices

China will raise the retail prices of gasoline and diesel to reflect recent changes in international crude oil prices, Xinhua reported, citing the National Development and Reform Commission—the country’s central economic planning body.

Brent crude has gained some $10 per barrel since the start of the year and West Texas Intermediate is trading around $12 per barrel higher now than it did at the start of January. The price increase reflects tightening global supply and a better outlook for demand.

As a result, prices for gasoline and diesel on the Chinese market will be raised by around $28 per ton, the National Development and Reform Commission said, directing refiners to continue ensuring the state supply of fuels.

Earlier this year, China National Petroleum Corporation predicted that oil product demand in the country could peak by next year, driven by the progress of the energy transition. Demand for fuels specifically, is seen starting to decline from 2030, CNPC’s Economics and Technology Research Institute said last month. However, oil-derived fuels will remain the most used until 2035.

Electric cars appear to be the main factor that CNPC’s researchers see as determining the future of oil demand but EV sales growth in China has started declining. After years of strong growth, the market is giving signs it is nearing the point of saturation, driving Chinese carmakers to eye international expansion as their new means of profit growth. At home, this weakening demand prompted massive price wars that also involved foreign players in the Chinese EV market, such as Tesla and VW.

Oil demand, meanwhile, broke yet another record last year and is seen remaining strong this year as well amid signs of acceleration in economic activity. Per CNPC data, oil demand in China last year rose by 11.5% on the year, with oil product demand up by 9.5%.

By Charles Kennedy for Oilprice.com

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