How are domestic refined oil prices in our country adjusted? Here's the explanation

Why did AI · Why did the temporary regulation of oil prices reduce this increase?

On the afternoon of March 23, the National Development and Reform Commission announced that, based on the current pricing mechanism framework, temporary measures would be taken to regulate domestic refined oil prices. According to the current pricing mechanism, starting from 24:00 on March 23, the prices of domestic gasoline and diesel (standard products) should each increase by 2,205 yuan and 2,120 yuan per ton, respectively. After regulation, the actual adjustments were 1,160 yuan and 1,115 yuan.

Converted to per-liter prices, this regulation results in an increase of about 0.87 yuan and 0.95 yuan per liter for domestic gasoline and diesel (standard products), respectively, which is about 0.85 yuan less per liter than if no regulation had been applied.

Fluctuations in oil prices affect people’s hearts. Many are concerned about how domestic refined oil prices are adjusted. There are two key aspects to understand.

1. Linked to international oil prices.

The domestic refined oil pricing mechanism stipulates that the maximum retail prices of gasoline and diesel are based on international crude oil prices, adjusted once every 10 working days.

It is important to note that domestic gasoline and diesel prices are anchored to an average of a basket of international crude oil prices. Price adjustments are influenced by multiple factors, not just a single international crude oil price. The adjustment magnitude is not simply determined by changes in international crude oil prices at specific points or days, but by comparing the average price of the basket of international crude oil over the 10 working days before the last adjustment with the previous 10-day average.

2. Implementation of interval regulation.

When the international crude oil price over the previous 10 working days exceeds $130 per barrel (the so-called “ceiling price,” corresponding to an average retail price of about 10 yuan per liter for domestic 92-octane gasoline) or falls below $40 per barrel (the so-called “floor price”), the government will take price regulation measures.

Articles 6 and 7 of the “Oil Price Management Measures” provide detailed regulations on interval regulation.

Article 6 states that when international oil prices fall below $40 per barrel, domestic refined oil prices will no longer be lowered; when prices exceed $130, they generally will not be raised or will be raised minimally.

Article 7 also states that in cases of abnormal fluctuations in international market oil prices, the government can regulate refined oil prices.

These regulations balance the interests of consumers and producers, preventing domestic refined oil prices from experiencing large fluctuations due to sharp changes in international crude oil prices.

Previously, in 2022, when international oil prices surged significantly due to the Russia-Ukraine conflict, the National Development and Reform Commission explicitly stated that once international oil prices exceeded the $130 per barrel cap, domestic refined oil prices would not be increased in the short term (no more than two months), and phased subsidies would be provided to refining companies.

Experts believe that this temporary regulation of domestic refined oil prices helps slow the impact of rapid international oil price increases, alleviating downstream user burdens and ensuring stable economic operation and social well-being.

(Source: People’s Daily Client)