China won't treat diesel,petrol prices differently

BOAO, China, Apr 22: China, groping for the proper oil-price structure for its energy-thirsty economy, would not raise gasoline prices while holding down the cost of diesel, the country's top energy planner said on Saturday.

Diesel accounts for a third of China's fuel consumption and gasoline for about a sixth.

That has led to some speculation that Beijing could raise the price of the latter while keeping a lid on diesel prices to protect heavy users of the fuel such as farmers.

But Zhang Guobao, vice-chairman of the National Development and Reform Commission, told Reuters: ''Diesel and gasoline are both valuable sources of energy. It's impossible to raise the price of one of them and not the other.'' Zhang was speaking on the sidelines of the Boao Forum, an annual gathering of regional political and business leaders on Hainan island off China's south coast.

China has promised to reform its oil price mechanism along market lines but has been slower in announcing changes than most analysts had expected because of worries among some policy makers about the impact of dearer energy on vulnerable groups.

Alluding to the political difficulty of striking the right balance, Zhang said it was hard to say when Beijing would adjust domestic prices again.

While the decision would be driven principally by market forces, Zhang said energy was so important that it could not be divorced completely from political and diplomatic factors.

China raised retail gasoline prices by 5 percent and diesel prices by about 3 percent in late March. It was the first increase in regulated pump prices since last July and fell short of expectations of an increase of as much as 20 percent.

China, the world's second-largest oil consumer, has been spared much of the pain of soaring global energy prices as Beijing raised prices by only about 15 percent in 2005 even though global crude prices soared by about 40 percent.

Prices have continued to rise, vaulting past a barrel on Friday on a fresh influx of investment money against a background of tensions over Iran's nuclear ambitions.

Zhang sidestepped a question about China's oil imports in 2006, saying Premier Wen Jiabao had set the tone for this year by stressing the need to conserve energy.

''So my answer is that we must make conservation and the efficient use of energy our priority,'' Zhang said.

REUTERS