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2008-06-20 | All chapters

China should charge its rich more for petrol: expert
Chen Aizhu, Reuters, 19th June 2008

BEIJING -- China needs to find better ways to reform its fuel pricing system, such as making private car drivers pay more for petrol, to help avert shortages and save energy, experts said..

China, battling decade-high inflation, has frozen its domestic pump prices for gasoline and diesel since last November and ruled out imminent price hikes even as global crude charges towards $US140 a barrel.

The price cap, especially on gasoline, does not encourage fuel saving or emission controls, problems that Beijing's energy policy makers are well aware of, experts at European Chamber's Energy Working Group said.

The price controls have also curbed domestic refinery output and forced China to raise petrol imports to record highs.

Xavier Chen, chairman of the Chamber's Energy Working Group, said Beijing should consider removing the gasoline subsidy and make car owners pay more, such as by raising road tolls and introducing toll fees for congested city areas.

"Subsidies should go to target groups but not the rich," Mr Chen told reporters, adding that they should be channelled to vulnerable groups such as farmers and taxi drivers.

Petrol prices in China are about a quarter below those of the United States and less than half those in Singapore.

Smaller cars with less emissions and electric motors should also be promoted, he said.

He said Beijing has been trying many attempts since 2000 to align its domestic fuel prices with international rates but was still struggling to come up with a comprehensive scheme.

"It's not the government's intention to maintain artificially low prices. It's because it lacks policy responses to the rapid change of market realities," said Mr Chen, formerly China Program Manager with the International Energy Agency.

Beijing was warming up for a new crude-cost-based domestic fuel mechanism in 2005 when crude was about $US60, hoping prices would fall. Global crude markets have been on a steep climb since.

"They missed the great opportunity (in 2005) to do it and now its too late. They are sitting on a tiger and hard to get off the tiger," said Joerg Wuttke, President of the European Chamber and also an energy industry executive.

"They do understand the problems. It's just that the tiger is vicious. It's the inflation."

Source: http://www.businessspectator.com.au/bs.nsf/Article/China-should-charge-its-rich-more-for-petrol--expe-FRDD4?OpenDocument

The Chinese version of this news: http://cn.reuters.com/article/cnBizNews/idCNnCN029495320080619