China Plans Gasoline, Diesel Price Cuts, Fuel Tax

By Winnie Zhu

Nov. 20 (Bloomberg) -- China, the world's second-largest energy user after the U.S., is accelerating plans to change the nation's fuel-pricing system and introduce a levy on retail oil-product sales, the nation's top economic planner said.

The central government has sought opinions from officials at various ministries and local provinces on the plan, which includes cutting fuel prices and abolishing road tolls, the National Development and Reform Commission said in a statement today, without elaborating.

Falling crude costs and a slowing economy have sparked speculation China will cut fuel prices for the first time in two years and reform energy pricing to ease costs. Changes may be announced in 20 days, the official China Daily newspaper reported yesterday. The world's fourth-biggest economy grew at the weakest pace since 2003 in the third quarter.

China may cut gasoline and diesel prices by about 15 percent as early as next week, Gordon Kwan, the head of China Energy Research with CLSA Ltd., said in e-mailed comments today.

Mu Hong, vice director of the commission, said last week increased oil-product supplies and falling demand have provided an opportunity to change the nation's fuel pricing.

China regulates energy prices to limit their impact on inflation. The government should lower prices as the average gasoline price at the pump in China is currently 50 percent higher than in the U.S., Kwan said.

Chinese fuel users currently pay road tolls and maintenance charges instead of a fuel tax.

To contact the reporter on this story: Winnie Zhu in Shanghai at wzhu4@bloomberg.net