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Beijing's pricy oil

(China Daily)
Updated: 2008-10-11 11:12

It is necessary for Beijing drivers to pay more for gas and diesel oil if the city is to continue to enjoy the unusually clean air and blue skies it witnessed during the Olympic Games.

But a hike in pump prices aimed to cover the extra cost for domestic oil companies to produce cleaner fuel will neither help raise the environment awareness of the public nor facilitate market-oriented reform of the oil pricing system.

Early this week, the Beijing Municipal Commission of Development and Reform raised benchmark prices of gasoline and diesel by 200 yuan ($29) per ton and 290 yuan per ton respectively.

Nevertheless, Beijing's price hike does not come as part of a national price adjustment. On June 20, the country raised the retail prices of gasoline to both offset some of State-owned oil refiners' loss and boost the national campaign of energy conservation.

At that time, the decision to raise domestic oil prices was widely deemed necessary both for the rapid rise of international crude prices and brave given soaring consumer inflation at home.

In view of the country's urgent need to substantially increase energy efficiency and Beijingers' strong desire to have cleaner air and more blue skies, it should not be surprising if the municipal authorities decide to take the lead in embracing market measures to enhance environmental protection and energy conservation.

After Beijing introduced a series of post-Olympic car restrictions to reduce traffic and pollution, an environmental-friendly hike of oil prices appears quite acceptable, if not more than welcome.

Unfortunately, instead of emphasizing the need to discourage inefficient and unchecked oil consumption, the municipal officials sold the latest oil price hike as a move to compensate oil refiners for producing cleaner fuel.

It surely costs more to refine high standard gasoline for the capital than the less-cleaner fuel used elsewhere in China. But it is not a good idea to shift the burden of extra cost onto consumers of less polluting fuel while leaving others as business as usual.

To promote use of cleaner and thus expensive fuel or other energy, the government is obligated to subsidize either the producers or consumers of such cleaner products. It is one thing to raise overall gasoline prices to encourage energy conservation, and it is another to shift the responsibility of subsidizing promotion of cleaner fuel to the consumers.

Besides, such a price hike to cover the opaque cost of giant oil firms is so ill-timed that it will only give rise to public doubt if the country's oil pricing reform has progressed at all.

International oil prices have so far fallen about 40 percent since soaring to a record $147 on July 11. A hike in domestic oil prices against this background just looks too strange to comprehend.