BEIJING, Oct 29: China reiterated on Friday it will reform its pricing system for refined oil and natural gas to make it better reflect international prices, the official Xinhua new agency reported.

The current oil pricing mechanism is not perfect. It is not able to reflect the fluctuations of the international market, Xinhua quoted Ma Kai, director of the National Development and Reform Commission as saying.

Domestic oil prices are relatively low, which will not benefit energy conservation. We should resolutely push forward the pricing reform, he said.

Under the current system, retail oil product prices are set by the government, theoretically based on prices in futures exchanges in Rotterdam, Singapore and New York.

But while global crude prices are up 55pc since the start of the year, China’s gasoline retail price has climbed by little over 15 per cent in the same period.

This discrepancy means China’s refiners are losing money processing crude, and so have been holding down supplies to the domestic market while boosting exports to try to protect margins, contributing to recent shortages in southern China.

Any reforms should be “stable” to minimise negative impacts on economic growth, Xinhua said.

Abnormal fluctuation of the international oil prices and speculation (in the international market) should not be entirely transferred to domestic prices, so that stable economic growth and social stability can be maintained, Ma said.

Analysts say the government, nervous about sparking inflation or social unrest with higher fuel prices, is reluctant to take the painful steps needed to resolve the country’s supply problems. —Reuters