Domestic gasoline and diesel prices may see the largest increase, with price hikes entering the "9 yuan era"

Ask AI · How will China’s refined oil pricing mechanism respond to the surge in international oil prices?

Refilled a 50-liter tank of 92-octane gasoline is expected to cost an additional 86.5 yuan

Text | Financial News Reporter Xu Peiyu

Editor | Huang Kaixi

China’s gasoline and diesel prices, linked to international crude oil prices, will experience the largest single adjustment since market-based refined oil pricing was implemented.

The deadline for the next adjustment of China’s retail maximum prices for refined oil is 24:00 on March 23. According to multiple market information agencies, based on the adjustment rules set by the National Development and Reform Commission, refined oil prices are expected to increase by over 2,000 yuan per ton, with the maximum retail price of 92-octane gasoline rising above 9 yuan per liter.

According to Zhuochuang Information’s calculations, as of the close on March 19, the international crude oil price used as a reference for China’s refined oil pricing has increased by 45.21%, corresponding to a retail price increase of about 2,000 yuan per ton. With one working day remaining before the adjustment window opens, the change rate of crude oil is expected to continue rising, and the final price increase for China’s retail refined oil could reach around 2,200 yuan per ton. Converted to per-liter prices, 92-octane gasoline, 95-octane gasoline, and zero diesel will each increase by approximately 1.73 yuan, 1.83 yuan, and 1.87 yuan per liter, respectively. Based on this, car owners will need to pay an additional 86.5 yuan for a full tank of 50 liters of 92-octane gasoline.

Compared to retail prices, China’s wholesale refined oil prices are more market-oriented and can be adjusted by enterprises themselves. Monitoring by multiple market agencies shows that recent wholesale prices of refined oil in China have risen significantly, with the retail-wholesale price gap narrowing noticeably, and in some cases even inverted. Under these circumstances, some traders have hoarded and withheld supplies. After this adjustment, the retail-wholesale price gap is expected to widen again.

Potential Largest Adjustment

Since 2026, China’s maximum retail prices for refined oil have undergone five adjustments: four increases and one pause. According to Longzhong Information, after the last adjustment (at 24:00 on March 9), the prices of gasoline and diesel in China have increased by a total of 1,160 yuan and 1,120 yuan per ton respectively since the end of last year.

Longzhong believes that there is no doubt that the retail prices of refined oil will be increased at 24:00 on March 23. However, recent turmoil in the Middle East has caused sharp fluctuations in international oil prices, and in extreme cases, regulatory authorities may limit the increase. The final adjustment amount will depend on regulatory discretion.

On June 20, 2008, both gasoline and diesel prices increased by 1,000 yuan per ton; the second major increase occurred after the Russia-Ukraine conflict erupted, on March 17, 2022, with gasoline and diesel prices rising by 750 yuan and 720 yuan per ton respectively. Under normal adjustment rules, the adjustment at 24:00 on March 23 will be the largest single adjustment since the market-based reform of refined oil prices.

China’s refined oil market was reformed in 2008, with further improvements to the pricing mechanism in 2013 and 2016. According to the “Oil Price Management Measures” issued by the National Development and Reform Commission in 2016, the maximum retail prices for gasoline and diesel are based on international crude oil prices, considering domestic processing costs, taxes, reasonable circulation expenses, and appropriate profits. Prices are adjusted every 10 working days according to changes in international crude oil prices. If the change is less than 50 yuan per ton, no adjustment is made; the difference is carried over or offset in the next adjustment.

The Measures specify that when international crude oil prices fall below $40 per barrel (including), refined oil prices are calculated based on a crude oil price of $40 per barrel with normal processing profit margins. When prices are between $40 and $80 per barrel (including), prices are calculated with normal profit margins. When prices exceed $80 per barrel, processing profit margins are gradually deducted until refined oil prices are calculated at zero profit. When prices exceed $130 per barrel (including), to balance the interests of producers and consumers and maintain economic stability, appropriate fiscal and tax policies are adopted to ensure production and supply, and prices for gasoline and diesel are generally kept stable or increased minimally.

The specific international crude oil varieties and their weights used as benchmarks for China’s refined oil pricing have not been publicly disclosed by regulators. When the National Development and Reform Commission issued the “Notice on Further Improving the Formation Mechanism of Refined Oil Prices” in March 2013, it adjusted the crude oil varieties linked to domestic refined oil prices. The notice stated that, based on the structure of imported crude oil and international trade changes, the varieties linked to domestic refined oil prices were adjusted accordingly.

Industry analysts believe that after the 2013 adjustment, the benchmark for China’s refined oil prices incorporated or increased the weight of Middle Eastern Dubai crude oil, while reducing or removing the weight of New York WTI crude oil. Since the U.S. military actions against Iran, Dubai crude oil prices in the Middle East have risen more than WTI and London Brent futures prices. This is one of the reasons for the larger adjustment in China’s refined oil prices this time. The previous adjustment (at 24:00 on March 9) saw domestic retail prices of gasoline and diesel increase by 695 yuan and 670 yuan per ton respectively.

Due to conflicts causing the Strait of Hormuz transportation halt and a sharp drop in trade volume, Middle Eastern crude benchmarks have surged to historic highs, becoming the most expensive globally. On March 19, Dubai crude spot prices reached $166.97 per barrel, with a premium of nearly $50 per barrel over Brent crude.

Downstream Profits in the Refined Oil Market Are Affected

After the adjustment at 24:00 on March 23, the impact on fuel vehicle travel costs will be significant. According to Zhuochuang, for example, a private car driving 2,000 km per month with an average fuel consumption of 8 liters per 100 km, the fuel cost per vehicle will increase by about 138 yuan before the next adjustment window (April 7, 2026, 24:00). For the logistics industry, a heavy truck driving 10,000 km per month with a fuel consumption of 38 liters per 100 km, the fuel cost per vehicle will increase by approximately 3,553 yuan during the same period.

Wholesale refined oil prices are rising faster than retail prices, squeezing retail terminal profits such as gas stations. Meanwhile, rising crude oil costs are also squeezing refinery profits.

According to Longzhong, during this cycle (from 24:00 on March 9 to 24:00 on March 23), China’s theoretical retail profit for gasoline was 567 yuan per ton, down 62.3% from the previous adjustment cycle; for diesel, it was 373 yuan per ton, down 71%. In terms of procurement costs, wholesale prices for gasoline and diesel are close to the wholesale price ceiling, with retail profits narrowing significantly. Meanwhile, refinery margins initially recovered temporarily but then narrowed again due to weak demand, with refined oil price increases lagging behind crude oil.

International commodities information agency Argus reports that private refineries in the Bohai region of China have recently reduced their offers due to sharply rising crude costs, hoping to sell products at higher prices later. Some refining companies have also raised diesel prices to the wholesale ceiling for all sales companies, limiting sales to individual buyers to under 30 tons, and only to downstream users, halting sales to private traders.

Many Asian countries importing Middle Eastern crude oil are experiencing similar issues. According to the Petroleum Association of Japan (PAJ), as of the week ending March 14, the average operating rate of Japanese refineries was 69.1%, down 8.5 percentage points from the previous week, the largest weekly decline since May 2024.

Meanwhile, jet fuel prices in many countries have recently risen, with several Asian airlines announcing fare hikes or fuel surcharge increases. On March 11, Thai Airways announced plans to raise ticket prices by 10%-15% to cover rising fuel costs. India’s airlines are raising long-haul fares by 15% and considering further increases. Chinese airlines such as Juneyao Air, Xiamen Air, and China Southern have recently announced increases in fuel surcharges on some international routes.

Jet fuel prices significantly impact airline profitability. Air China’s 2024 annual report states that, all other variables remaining unchanged, a 5% increase or decrease in average jet fuel prices would raise or lower the company’s fuel costs by approximately 2.686 billion yuan.