Higher windfall tax eyed amid oil crunch

Beijing may have to raise levy on crude producers to increase subsidies for refiners

Beijing has warned high oil prices are making a major impact on the economy in the form of fuel supply shortages, and analysts say it may need to raise the windfall tax on oil producers so it can pay more subsidies to refiners and ask them to raise fuel output.

The National Development and Reform Commission said strong economic growth has seen the mainland's oil consumption surge year by year, with its dependence ratio on foreign crude oil rising to almost half this year.

'High crude oil prices have affected the economy directly as that resulted in an increase in crude costs, which put more upward pressure on domestic refined fuel prices,' it said.

As Beijing suppresses domestic retail fuel prices at well below international levels, refiners have suffered losses amounting to tens of billions of yuan over the past two years.

Beijing started to collect a so-called special oil revenue levy, a form of windfall tax, in April last year and has used it to pay out subsidies to the refining, farming, fishing, forestry and public transport sectors.

The NDRC expects to collect 60 billion yuan of the levy this year, up from 45 billion yuan last year. It has collected some 41 billion yuan in the first three quarters this year.