China to `Take Advantage of Good Timing' to Change Fuel Pricing

By Winnie Zhu

Nov. 11 (Bloomberg) -- China, the world's second-largest energy user after the U.S., will ``take advantage of good timing'' to bring domestic fuel prices closer to international levels to reflect production costs, said Premier Wen Jiabao.

Wen didn't give details or a timetable on changes to the nation's fuel and natural gas prices in the statement posted on the government's Web site late yesterday. The plan forms part of seven measures to ward off a financial slump and comes a day after China announced a 4 trillion yuan ($586 billion) stimulus package to spur economic expansion.

Local newspapers have speculated the government will cut fuel prices for the first time in two years to reflect the 60 percent slump of crude prices from a record reached in July. Lower oil prices will help ease costs as the Chinese economy grew at the slowest pace since 2003 in the third quarter.

China controls fuel prices to curb their impact on inflation. The government has repeatedly said it plans to set up a mechanism to adjust domestic fuel prices in line with global levels. Benchmark crude prices in New York have fallen from a record $147.27 a barrel, as global equities tumbled on fears the financial crisis will send the world into a recession, curbing fuel demand.

The Chinese government raised fuel prices in November 2007 and again in June 2008. In June, prices were increased by as much as 25 percent.

China's consumer prices rose 4 percent in October from a year earlier, the slowest pace in 17 months, the statistics bureau said today. This may allow the government to increase gas prices, which are capped at lower than global levels.

Shanghai, China's commercial center, raised the retail price of natural gas by 19 percent yesterday, the first increase in five years, to help distributors cover costs.

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