Price increase an olive branch before summit
Beijing's unexpected fuel price increase guarantees China a friendlier reception at a world oil summit tomorrow, having bowed to pressure from developed countries to reduce energy demand.
Saudi Arabia, the world's largest oil exporter, has invited energy ministers from oil producers and consumers to a meeting in Jeddah as it seeks to stabilise the oil market.
Surging demand from the mainland has been blamed for the recent rise in oil prices.
Analysts said the increase in retail petrol and diesel prices appeared to signal an olive branch to the major powers ahead of Vice-President Xi Jinping's attendance at the meeting.
'The recent fuel price rises, announced ahead of the international oil summit, will promote more rational consumption patterns,' said Jing Ulrich, JP Morgan's chairman for China equities.
'As the world's second-largest oil consumer, China attaches great importance to improving energy efficiency.'
The country hopes to secure energy supplies to sustain its rapid economic growth amid soaring crude oil prices. It is widely expected that tension between China and the other participants will intensify when Mr Xi attends the meeting.
On Wednesday, 16 US senators sent a letter of appeal to the Bush administration, blaming China's price controls for high oil prices.
China imported 163 million tonnes of crude oil last year, up 12.4 per cent from 2006. Imported oil accounts for more than 50 per cent of the country's total consumption.
According to the International Energy Agency, 80 per cent of the country's oil consumption will rely on imports by 2030.
'Oil is in tight supply worldwide, and China hopes to secure more supply through co-operation and dialogue,' said Andy Xie, a Hong Kong-based independent economist.
'The participation by the vice-president [at the meeting] is expected to help China increase its influence in the world's oil industry.'
Economists said China's rising affluence, with US$1.8 trillion of foreign reserves, would help the country have a bigger say in the oil market.
'After all, it is the money that does all the talking,' Mr Xie said. 'But an efficient diplomatic strategy is also important for China.'
Mr Xi, the sixth most powerful Chinese leader in terms of government hierarchy, is the highest-level mainland official to ever attend the oil gathering.
