China said it would raise benchmark retail prices of gasoline and diesel by 290 yuan ($42.46) per ton and 180 yuan per ton, respectively, as of midnight Tuesday.
It is the second oil price adjustment this year. The National Development and Reform Commission (NDRC), China's top economic planner, cut benchmark pump prices of gasoline and diesel by 140 yuan and 160 yuan per tonne, or 2 percent and 3.2 percent, respectively, on January 14.
Experts said more frequent price adjustments show China can respond more quickly to international oil price changes after a new pricing mechanism took effect January 1, 2009.
Oil price fell to $53.10 a barrel in electronic trading on the New York Mercantile Exchange on Tuesday. On the previous trading day, it settled at $53.80 a barrel, the highest price since December 1.
Under the new mechanism, China's domestic prices are to be "indirectly linked" to global crude prices "in a controlled manner."
"The 'indirect link' would be based upon average global crude prices, while taking into account domestic production costs, taxation, and 'appropriate profits' of oil producers," deputy director of the pricing department of the NDRC, Xu Kuning, said.
Government-set fuel prices were previously changed infrequently.
As a result, either Chinese drivers ended up paying more than those in other countries when crude prices dropped, or domestic refineries suffered huge losses when crude prices surged.
Last December 18, when the international crude price dropped from a record $147 a barrel to less than $40, the NDRC announced a move to cut pump prices by 900 yuan and 1,100 yuan per tonne for gasoline and diesel, respectively.
The new pricing mechanism was announced the following day and took effect at the beginning of this year.
In Tuesday's notice to raise pump prices, the NDRC urged the two state-owned oil producers, PetroChina and Sinopec, to increase oil production to meet demands.
It also urged local pricing regulators to strengthen supervision over oil prices and crack down on any price violations.
China's crude oil output reached 190 million tonnes in 2008, up 2.3 percent year-on-year, the highest growth in three years, according to the China Petroleum and Chemical Association.
Imports of crude oil rose 9.6 percent year-on-year to 179 million tons last year, which accounted for 48 percent of total crude oil demand.
(Xinhua News Agency March 24, 2009)