The Sichuan Provincial government has said it will liberalise oil product prices in 2017 in line with the central government’s strategy.
No details about how pricing will be managed have been released, but sources have said the reform will involve freeing both the wholesale and retail price.
The National Development and Reform Commission’s (NDRC) chairman, Xu Shaoshi, has said Beijing intends to ease its grip over fuel pricing in the 13th Five-Year Plan (2016-20).
He said that by 2017 prices for commodities in so-called competitive sectors should “be basically liberalised” and by 2020 prices would be set by market forces. Industry sources have said Sichuan’s reform next year will be the first step towards that 2020 goal.
Under the current oil product price mechanism, China sets the country’s reference fuel prices according to international crude prices while also weighing up crude-processing and distribution costs, taxes and profit margins. The government adjusts fuel prices when the average price of a basket of international crude benchmarks fluctuates by more than 4% every 10 working days. In January, the NDRC set a floor and ceiling price for prices, meaning the state does not adjust domestic retail prices when international oil prices fall below US$40 per barrel or top US$130.
The NDRC said the boundaries were aimed at curbing pollution and countering the negative effects of major international oil price fluctuations. The policy is also in line with the NDRC’s previous practice of allowing refiners to charge higher prices for higher-quality fuels from upgraded facilities.