By Fu Jing (China Daily)
Updated: 2007-07-26 08:53

"The prices of oil products really need adjusting low oil product prices are not conducive to energy saving," said Cao. But he added that the government faces another problem: raising oil product prices may accelerate the current round of inflation.

"So we are in a dilemma now," Cao said yesterday. He added that regulators need more time to assess the situation.

The NDRC has been under pressure to raise gasoline prices. The nation's two largest oil companies, China National Petroleum Corp and China Petroleum & Chemical Corp, recently joined a group of applicants to seek a price hike for refined oil products.

But Cao expressed fears that raising prices of oil products will increase the prices of other industrial products, fueling the present inflationary spiral. "That is not good for the health and stable development of China's economy."

Oil refiners in China say rising international crude oil prices have already squeezed their profits. The nation's largest oil refiner, Sinopec, which imports 70 percent of its crude oil, has reportedly seen a loss in its second-quarter refining figures because of high crude prices.

Cao said the government will subsidize the refiners but didn't reveal the details.

China has already started reforms to gradually deregulate refined oil prices. The reform has gathered momentum since last year, with prices being raised twice. But the momentum has slowed down this year even as global oil prices skyrocketed in March and June.

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