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The secret of the price of oil in ChinaPosted by Eric Mu, March 27, 2009 5:49 PM
 The Beijing News March 27, 2009 "Domestic oil pricing mechanism revealed for the first time," reads a headline on the front page of The Beijing News. Peng Sen, the vice-director of the National Development and Reform Commission, which is in charge of domestic oil pricing, stated that the price of refined oil in China is decided based on the international crude oil price, but the government only considers making adjustments when the average rise or drop is more than 4% over a given period of 20 days. Peng also explained that hike in gasoline prices on March 25 was a response to a spike in international crude oil prices that has lasted over 20 days. Lin Boqiang, director of the energy research center at Xiamen University, was also quoted in the article refuting the idea that the government only responds to upward motion of the international market. Lin said, "The recent international price drop didn't last very long, so it's unjustified to accuse the government of only following the ups and not the downs." However, Lin's defense of the NDRC may not be justified, either. Han Wenke, an official in the NDRC's Energy Research Institute, has spoken to the media about oil pricing in the past. His opinion has changed based on the circumstances, something that Internet users have gleefully pointed out. In January 2008, when the price of crude oil on the international market was midway on a climb from US$40, Han implied that domestic prices should be higher:
In November, Han Wenke changed his stance, and said that pegging the domestic price of refined oil to the international market was not going to happen any time soon: "China is still a developing country. It is unrealistic to tie everything to the international market." At that time, the price of crude oil price was declining from its height of US$147. Links and Sources
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Comments on The secret of the price of oil in China
I'm interesting by the implicit assumption in your article (and almost every other on the subject) that China is wrong to control oil prices. Do you, given everything that happened over the past year with oil leaping to 140 before falling to 30 or so, with the financial collapse etc etc ...still maintain that the international market sets rational prices. Seems like your brains are taking a little longer than the norm to catch up with reality.
John:
Let me clarify this: I didn't assume either it is right or wrong in the post for the Chinese government to control the domestic oil price. Neither do I write on the subject as often as you may assume-the first time that I remember.
The issue here is rather about what really factoring the pricing besides the international price, which is a question that has been brought up quite often lately by the public who think they have a right to know and would like to see more transparency in the decision making.
I personally think the "Han Wenke" story I referred to in the post quite telling about the government's incapability of consistent policy-making and their habit of feeding the public with excuses and lies which usually don't stand long. That's why I included it in the post.