Video | Why Implement Temporary Control Measures for Finished Oil Prices? Expert Interpretation

Why is there a $130 cap set on the refined oil price mechanism?

According to the National Development and Reform Commission, starting from 24:00 on March 23, domestic gasoline and diesel prices will be adjusted. The prices for domestic gasoline and diesel will each increase by 1,160 yuan and 1,115 yuan per ton, respectively. It is explained that based on the current pricing mechanism, this adjustment should result in an increase of 2,205 yuan and 2,120 yuan per ton for gasoline and diesel. To mitigate the impact of abnormal international oil price surges, reduce the burden on downstream users, ensure stable economic operation, and safeguard social livelihoods, the National Development and Reform Commission has implemented temporary control measures on domestic refined oil prices while maintaining the existing price mechanism framework. After the adjustment, the increases are reduced by 1,045 yuan and 1,005 yuan per ton, respectively, which is roughly a 0.85 yuan per liter increase for the national average gasoline and diesel prices. Based on a 50-60 liter tank, full tank filling after the adjustment can save about 40-50 yuan.

Since the domestic refined oil prices were adjusted on March 9, affected by escalating conflicts between the US, Israel, and Iran, international crude oil prices have surged significantly, especially with Middle Eastern crude reaching record highs.

The National Development and Reform Commission stated it will guide domestic refined oil producers and sellers to organize production and transportation to ensure market supply, and will cooperate with relevant departments to intensify market supervision and inspection, strictly investigate illegal activities such as non-compliance with national pricing policies, and effectively maintain market order and protect consumer interests.

Why are temporary control measures being taken on refined oil prices?

What is the reason for this recent adjustment of refined oil prices? Why does the government need to implement temporary control measures?

Tian Lei, Deputy Director of the Energy Research Institute at the China Macroeconomic Research Institute, said that recently, due to escalating conflicts between the US, Israel, and Iran, international crude oil prices have risen sharply, with increases generally exceeding 40% across regions. Particularly, Middle Eastern crude oil prices have rapidly surged to over $150 per barrel, setting new historical highs, more than 130% higher than before the conflict. The rise in international crude oil prices directly increases China’s import and consumption costs.

Lü Zhichen, Deputy Director of the Price, Cost, and Certification Center of the National Development and Reform Commission, explained that to mitigate these adverse effects and reduce the burden on downstream users, the government has adopted temporary control measures on refined oil prices. This move fully demonstrates the advantages of the socialist system with Chinese characteristics and is a timely and effective response to abnormal fluctuations in international markets. It plays an important role in ensuring stable domestic economic operation and reflects the CPC Central Committee’s care and concern for the people.

How does the domestic refined oil pricing mechanism work?

Tian Lei explained that there are three key points in the domestic refined oil pricing mechanism:

• First, a basket approach. Domestic gasoline and diesel prices are anchored to the average price of a basket of international crude oils, and price adjustments are influenced by multiple crude oil prices, not just one.
• Second, an average price. The adjustment is not simply determined by the price changes 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 adjustment with the previous adjustment period.
• Third, interval regulation. When the average price of the basket of international crude oil over the 10 working days before the adjustment exceeds $130 per barrel or falls below $40, the government will take price regulation measures.

Lü Zhichen noted that in recent years, domestic refined oil prices have been adjusted based on the changes in the average price of the basket of international crude oil over the 10 working days before each adjustment, with fluctuations both upward and downward. For example, in 2023, the prices saw “10 increases, 12 decreases, 3 no change”; in 2024, “9 increases, 9 decreases, 7 no change”; in 2025, “7 increases, 12 decreases, 6 no change,” totaling “26 increases, 33 decreases, 16 no change” over three years.

If international oil prices continue to rise sharply later on

What other control measures might the government take?

If international crude oil prices continue to rise significantly, what other measures might the government implement? Experts say that to stabilize supply, the government may adopt some fiscal and tax support policies.

Lü Zhichen stated that the current domestic refined oil price mechanism has a cap set at $130 per barrel. If the average price of the basket of international crude oil continues to rise sharply beyond $130 per barrel—meaning the domestic refined oil prices (such as the retail price of 92-octane gasoline) would be slightly above 10 yuan per liter—this would trigger the price cap. For the portion exceeding the cap, the maximum retail prices of domestic gasoline and diesel will not increase or will increase less. To stabilize supply, the government may also adopt fiscal and tax support policies. Looking at past cases, during the Russia-Ukraine conflict in 2022, which caused a significant surge in international oil prices, the government clearly stated that once international oil prices exceeded the $130 cap, domestic refined oil prices would not be increased in the short term (no more than two months), and refinery companies received phased subsidies.

(Reported by CCTV Liu Ying, Wu Hao, Chen Qian, Li Tang)

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