maher1 - Retail investors finally woke...up and realized that high energy prices are slowing down the world economy in a big way. Plus, this announcement, last week, has, I'm sure, made investors take some profits.
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G&M News: China hikes fuel and electricity prices...
Thursday, June 19, 2008
BEIJING — China raised retail gasoline and diesel prices Thursday by up to 18 per cent, a move that threatens to stoke domestic angst over decade-high inflation less than two months before Beijing hosts Olympics games.
The increase in regulated fuel prices, China's first hike in eight months and its sharpest ever one-off rise, sent oil prices down by as much as $3 (U.S.) a barrel as dealers bet it might help curb soaring demand.
However, U.S.-listed shares in top refiner Sinopec surged over 8 per cent as the increase will aid its profits.
The rise shows China following its neighbours from India to Indonesia in bowing to the pressure of near $140 crude oil.
Most analysts had expected Beijing to hold off on an unpopular fuel price rise until after the Olympics in order to keep a leash on inflation, already at a near 12-year high.
“Global crude prices have been rising sharply and Chinese domestic fuel prices have lagged behind. The price difference has highlighted the contradiction between demand and supply,” state television said, quoting the National Development and Reform Commission.
Prices for gasoline and diesel prices will rise by 1,000 yuan ($145.5 U.S.) per tonne each effective from midnight, state media reported on Thursday evening.
China will also raise average electricity tariffs by 0.025 yuan/kwh or about 4.7 per cent on average, a rise that will primarily affect industrial and commercial users, the NDRC, China's top planning body, said on its website.
The rise, which will be effective from July 1, is its first broad increase in years and will bolster power companies struggling with the soaring cost of coal, which generates some three quarters of China's electricity.
Refiners Sinopec and number two PetroChina, which is less reliant on costly imported crude, will get an immediate boost from the price increase as they have faced years of losses from paying rising global prices for crude and selling refined gasoline and diesel at below-cost domestic rates.
Oil prices fell as much as $3 a barrel immediately after the news on worries that demand from the world's second-largest oil user – where prices have risen only once in the past two years, a 10 per cent hike in November – would be hit.
China's rapid demand growth was one of the catalysts for oil's surge from $20 six years ago to a record high of nearly $140 a barrel earlier this week.
The move in November took many market watchers by surprise as Beijing has repeatedly vowed to rule out “near-term” price increases to battle high inflation and avoid social unrest barely two months away from the Beijing Olympics.
China also raised jet fuel prices by 1,500 yuan per tonne.
In Beijing and Shanghai, motorists queued for gasoline at petrol stations Thursday night as word of the price hike leaked out. Police stood by at one Beijing petrol station.
At least one station told customers it could not serve them until the price hike took effect at midnight, prompting an altercation between staff at the station and a group of angry motorists.
© The Globe and Mail