(Bloomberg) -- China will offer oil refiners subsidies should international crude prices surge above $130 a barrel to ensure the stable supply of fuels and prevent processors from passing on higher costs to consumers.
The move is to lower economic costs and ease consumer burdens, along with ensuring the safe and stable supply of oil products, according to a statement from the Ministry of Finance. Refiners and fuel traders who produce or import gasoline and diesel will be offered subsidies for as long as two months if crude prices breach the targeted ceiling, details from the statement show.
Oil has rallied this year as an economic recovery coincided with upended trade flows from Russia after its invasion of Ukraine, driving global benchmark Brent crude as high as $139 a barrel. Strict virus lockdowns in China likely capped further gains, but easing restrictions could turbocharge prices once again.
China’s willingness to buy discounted crude from Russia and Iran may shield the nation from some further price gains. China adopts a mechanism where the price of fuels such as gasoline and diesel won’t be adjusted as long as crude is higher than $130 a barrel or below $40 to protect both consumers and refiners.
The nation adjusts retail fuel prices every 10 working days based on the cost of selected crude grades traded internationally. The next adjustments will be announced on July 12 and July 26, and if oil prices haven’t surpassed $130 a barrel during the period leading up to those dates, subsidies won’t be implemented, according to a separate statement from the Ministry. Brent was trading near $118 on Wednesday.
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