“…China will raise prices of refined oil products and electricity beginning Friday, state media reported…”

By Christopher Bodeen
Source: AP

China will raise prices of refined oil products and electricity beginning Friday, state media reported.

The announcement, issued after local financial markets were closed, said prices of gasoline and diesel would rise by 1,000 yuan ($145) per ton. Aviation kerosene would rise by 1,500 yuan ($218) per ton, it said, citing the National Development and Reform Commission, the government’s chief economic planning agency.

Electricity prices would also rise for most businesses, although residential housing and the farming and fertilizer industries would be exempt, Xinhua said.

Growing demand for energy in developing countries like China has contributed to a string of record high prices for a barrel of oil this year.

The price of oil dropped immediately after news of the price hikes broke, believing that stress on the market from China may finally be lessening.

Light, sweet crude for July delivery fell $2.80 to $133.88 a barrel on the New York Mercantile Exchange, but dipped more than $3 at times.

China disclosed that it will raise the prices of refined oil and coal, used extensively for electricity generation. It was not immediately clear if it also would reduce subsidies.

Natural gas and liquefied petroleum gas prices would remain where they are, China state media reported.

The government hiked fuel prices by about 11 percent in November but have kept them frozen at that level, seeking to avoid further fanning inflation which has touched 12-year highs since the beginning of the year.

That policy, however, has led to shortages at the pump as refiners find themselves squeezed by rising oil and gas prices.

China’s largest city, Shanghai, on Monday announced an increase in prices for liquefied petroleum gas to help counter shortages stemming from a gap between local, controlled prices and costs paid by suppliers.

Earlier this week, the NDRC said it would look for an opportunity to adjust oil product prices, prompting a rally in shares for major refiners that have been swallowing huge losses due to soaring crude oil prices.