Oil giants should also pay

The double whammy of higher gasoline prices and more parking fees must have hit many car drivers in Beijing hard, and their grievances about the soaring cost of driving is understandable.

However, if Chinese policymakers are serious in their belief that adjusting fuel prices will help curb excessive use of oil and contribute to energy saving, they should not allow themselves to be swayed by such public complaints.

Instead, they should defend higher prices as the necessary means to pursue better energy efficiency and energy security for the whole country.

China raised the domestic price of gasoline and diesel by more than 5 percent on Thursday as international oil prices rose to a 30-month high.

Car drivers in Beijing may be more frustrated than others as they were shocked by an up-to-10-fold rise of parking fees in downtown areas at the beginning of this month.

However, domestic car drivers can have little complaint about the rise in fuel prices.

Under China's current pricing mechanism, the pricing authorities have the right to adjust the price of fuel if a basket of crude oil prices rises by more than 4 percent in a period of 22 work-days. Since China's last oil price adjustment on Feb 19, the price of international crude has risen by more than 10 percent.

Nevertheless, Chinese car drivers can legitimately ask why they are asked to pay for dearer gasoline when the big oil companies are basically left alone to make fat profits from it.

China's three largest oil companies made total profits of more than 368 billion yuan ($55.8 billion) last year thanks to the steady rise in oil prices. And they are all predicting strong profit growth this year as oil prices continue to go up.

Chinese policymakers are right to raise fuel prices in spite of the additional pressure it will put on China's ongoing battle against inflation. It is definitely urgent to slow the pace of consumer-price gains across the country. But that does not mean the government should pursue current price stability at the expense of its long-term commitment to energy conservation.

While stressing the need to make use of higher fuel prices to curb excessive oil consumption, the pricing authorities should not turn a deaf ear to car drivers' complaint about the fat profits the country's big oil companies have made from higher fuel prices.

If higher energy efficiency and better energy security is a top goal for the nation, not only consumers but also oil companies should be required to make their due contributions.

Policymakers should assure the public that the extra price they pay for dearer gasoline will go to energy conservation and not end in the pockets of the big oil companies.

(China Daily 04/08/2011 page8)