According to the National Development and Reform Commission, China's top economic planner, the country has formally adopted a pricing regime that takes into account the average international crude oil prices, tariffs, profits, logistics and refining costs.

The new regime is based on the crude oil prices in Brent on the North Sea, along with Dubai and Minas, Sumatra. This replaces the previous peg to oil product prices in Singapore, Rotterdam and New York.

In recent years, frequent price fluctuations on the international oil market have had an increasing impact on the domestic market, which has to satisfy a rapidly growing demand from domestic consumers.

The new regime is more closely linked to international price fluctuations. Since the refining costs will be included, the regime will ease pressure on China's unprofitable refineries.

Meanwhile, according to the new regime, when international oil prices are high, the profit margin for domestic refineries will be adjusted in the interest of consumers.

Despite the improvement in oil product pricing, the new regime, which is more flexible and market-based, will not solve the fundamental problem of an unbalanced domestic oil market.

The most prominent feature of China's oil market is the sellers' monopoly. The three State-owned oil conglomerates PetrocChina, China National Offshore Oil Co (CNOOC) and China Petrochemical Corp (Sinopec) have monopolized all links in the chain of oil production, from exploration and purchase of crude oil to retail sales.

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