Beijing to Offer Higher Prices for Clean Fuels to Encourage Production

In Beijing’s fight to reduce air pollution, the National Development Reform Commission (NDRC) has announced this week that it will raise prices for high quality clean fuels, beginning at the end of the year, in an attempt to encourage oil films to boost production of less polluting fuels.

Beijing has already asked China’s national refiners, led by Sinopec, to upgrade their plants in order to produce cleaner fuels, but the costly upgrades would force many companies to suffer heavy losses due to the lack of subsidies and low, state-controlled fuel prices.

The NDRC proposes to increase prices for any diesel and gasoline produced that meets the national IV fuel standards by 290 yuan ($47.37) and 370 yuan ($60.44) respectively; and any that meet the national V standards will be increased by 170 yuan ($27.77) for diesel, and 160 yuan ($26.14) for gasoline.

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China’s national IV fuel standards for diesel are similar to Europe’s IV fuel standards with a sulphur content of 50 parts per million, and the national V standard will be the same as the Euro V standards, with a sulphur content of 10 parts per million or less. The national V standards will become compulsory by the end of 2017, regardless, but it is hoped that these increased prices will encourage the fuel standards to be adhered to much sooner.

Sinopec, the state-owned oil giant, has already experienced high second quarter net profits this year after it was decided to let fuel prices follow the international market, rather than being set by the government, and are set to receive another boost from this decision to increase prices.

Beijing smog in January 2013. (BBC)

China’s entire diesel market consists of about 3.6 million barrels a day, and emissions from low-quality diesel have been identified as the main cause of urban air pollution.

Ever since the thick, toxic smog covered Beijing and much of northern China in January, the government has been under pressure to reduce air pollution around the country.

By. James Burgess of Oilprice.com