China will cut retail prices of oil products to the "floor rates" in light of a slump in international oil prices, the country's top economic planner said Tuesday.
Starting Wednesday, the prices of gasoline and diesel will be lowered by 1,015 yuan (about 145 U.S. dollars) and 975 yuan per tonne, respectively, the National Development and Reform Commission (NDRC) said in an online statement.
After the cut, the prices of oil products will be reduced to a level corresponding to 40 U.S. dollars a barrel, the floor set by the Chinese government, Peng Shaozong, an official with the NDRC, said at a press conference Tuesday.
Under the current pricing mechanism, China will adjust domestic prices of refined oil products when international crude prices translate into a change of more than 50 yuan per tonne for gasoline and diesel for a period of 10 working days, but will not do so if the international prices go below the floor of 40 U.S. dollars or above the ceiling of 130 U.S. dollars a barrel.
The floor and ceiling aim to buffer the negative effects of violent fluctuations in international oil prices, as excessively high prices will add to consumer burden. In contrast, low prices could hurt domestic oil production, leading to higher energy dependency on imports, according to Peng.
Oil prices declined significantly in the international market in the past few days, pressured by a looming supply glut and fears over weak demand.
The West Texas Intermediate (WTI) for April delivery decreased 3.03 U.S. dollars to settle at 28.70 dollars a barrel on the New York Mercantile Exchange, while Brent crude for May delivery was down 3.80 dollars to close at 30.05 dollars a barrel on the London ICE Futures Exchange.
The NDRC has asked major Chinese oil companies, including China National Petroleum, China Petrochemical and China National Offshore Oil, to ensure a stable supply and implement the pricing policy.
The economic planner said it would closely monitor the effects of the current pricing mechanism and make improvements in response to global fluctuations.