Thursday December 06, 2007

China proposes market-based energy pricing in draft of energy law

resourceinvestor.com :

The Chinese government may establish a predominately market-orientated energy pricing mechanism, according to a draft version of the country's upcoming Energy Law released by the Office of the National Energy Leading Group on Monday for public comment. Under the proposed mechanism, prices for energy products and services open to market competition will be set by the market. Energy products transmitted through monopolized pipelines or in which the public has a key interest will have their prices guided or set by the government.

The government has been discussing the implementation of a market-oriented pricing mechanism for some time, and any move in this direction will happen gradually. Given that China's CPI has maintained rapid growth, despite existing price controls which have blunted the impact of surging crude oil prices, any shift towards a market-oriented system would only exacerbate inflationary concerns.

- Classic rock and hard place scenario. If they don't let prices go up, they risk further fuel shortages, as refiners shut down due to negative profit margins. If they let prices go up, they risk price inflation really taking off and setting off some kind of political upheaval from disgruntled citizens. But of course, they have another card to play, and that is the currency card ...

See also :

1. Living the diesel shortages in China
2. China in grip of inflation
3. The peak oil crisis: revolt of the teapots

(2007-12-06 13:13:58 SGT) [Energy] Permalink

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