The country will consider its domestic oil supplies and consumer purchasing power when setting refined oil prices under a new system designed to link them with global crude markets, a top official said yesterday.

The comments by Han Yongwen, general secretary of the National Development and Reform Commission (NDRC), suggest that China is still not ready to adopt solely market-driven pricing for the world's second-largest consumer of oil.

The country has already started implementing the new fuel pricing system, taking cost and the benchmark Brent, Dubai and Mi-nas crude oil prices into consideration, said Han Yongwen, a commission spokesman.  

Related readings:  Refined oil price still lower than int'l market  Sinopec calls for new oil pricing mechanism  Oil price to stay high in 2007  Gasoline and jet fuel drop boosts stock mood

Asked on the sidelines of a news conference whether China was already using international crude markets to set domestic product prices, Han said, "That is not the whole story. The first thing is to link up with international prices, the second is to consider domestic supply and demand. The third is to consider what businesses and consumers, particularly consumers on low incomes, can bear."

NDRC, China's main economic planning agency, has effective responsibility for setting energy policy and prices under the direction of a group of top officials.

Industry sources say the system links domestic gasoline and diesel prices with the cost of crude benchmarks Brent, Dubai and Minas, plus a fixed margin for refiners.

State media quoted industry sources as saying the new system had been scheduled to start Jan. 1, and China in mid-January made its first pricing change since May 2006, trimming the price of gasoline and jet fuel on the back of a fall in global markets.

Officials have pledged to fully liberalize prices eventually but for years largely ignored the previous price system, which in theory linked China's pump prices to international physical refined fuel prices.

The government is caught between a desire to use prices to curb booming demand growth and fears that more expensive fuel could spark inflation and social unrest.

The new plan was expected to provide relief to Sinopec Corp and PetroChina, China's two top oil firms, which suffered huge losses in their refining arms over the last two years.

(For more biz stories, please visit Industry Updates)