Pricing model of China´s refined oil

Given these big losses, we take a look now at how prices are set for refined oil in the country.

Industry experts say the price of either imported or self- produced crude oil in China is already close to international levels.

Industry experts say the price of either imported or self-produced crude oil in China is already close to international levels. And given price controls, domestic refining companies now lose as much as 3,000 yuan for every ton of refined oil they produce and sell.

Currently,the prices of refined oil are set by the National Development and Reform Commission in China, while the prices of gas and diesel are related to the prices of the merchandise on hand on the markets of Singapore, Rotterdam and New York.

The NDRC sets the mid-point price which adds up freight and the weighted average price of the oil products on the three markets. It can adjust the mid-point price when the monthly weighted figure fluctuates over 8 percent. On top of that, the sale price of the refined oil can be set within a range of 5 percent by the top two domestic refiners.

Gao Shixian, Director Assistant of Energy Research Institute, NDRC, said, "Besides the pricing mechanism, there are also macro-controls. The government-guided price also has its effect."

The pricing model for refined oil was revised in 2003, allowing for gradual adoption of the international mechanism. Till now, the price of the refined oil has been adjusted 15 times the latest upward adjustment accounts for 26 percent.