The National Development and Reform Commission (NDRC) timed its fuel price hike on June 19 to perfection. Everyone was taken by surprise.
“Few people predicted the government’s decision. We did not expect it either,” said Zhang Chengrun, chairman of the Shandong Private Oil and Gas Association, which represents private refiners in the eastern province.
The NDRC successfully kept a lid on the move, without giving the game away. Two weeks earlier, an NDRC official said low fuel costs “serve social and economic stability.”
A report in the Chinese newspaper Economic Observer said the NDRC decided to raise prices at a special meeting after being “influenced” by state-owned oil giants China National Petroleum Corp and Sinopec.
But Farzam Kamalabadi, founder of oil, gas and energy consulting group Future Trends International, said the hike’s timing was carefully planned: Only three days later, Saudi Arabia’s state-owned oil firm was expected to announce increased production at a key oil meeting in Jeddah.
China hoped the hikes would dampen domestic demand, which together with increased global production, would drive oil prices down, said Kamalabadi. While oil prices did fall briefly after the Jeddah meeting, this was a “tiny, temporary” decrease, Kamalabadi added.
Another meeting may have also influenced the announcement: it came soon after the end of the US-China Strategic Economic Dialogue, in which the US encouraged China to pursue economic liberalization.