China will raise the price cap for its domestic retail prices of gasoline and diesel once again, as of May 22, in the latest hike of the maximum retail prices for domestic fuel since the Iran war led to surging oil prices.
China will now increase the maximum retail price of gasoline by $11.03 (75 Chinese yuan) per metric ton as of Friday, according to a notice by the state planner. The cap on China’s retail diesel prices will be raised by $10.29 (70 yuan) per ton, the authorities said.
Unlike another major Asian oil consumer, India, which only started raising domestic fuel prices last week, China has made several upward adjustments to the ceiling prices for retail gasoline and diesel since the Iran war began.
In early March, barely a week into the Middle East conflict, China hiked regulated caps for retail gasoline and diesel prices in the sharpest such increase since March 2022.
The recent price rises have already dampened consumption of road transportation fuels in China, analysts say.
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China’s gasoline demand has dropped since the Iran war upended the global oil markets and is on track to decline more than previously expected this year, due to the higher prices and the continued push toward electric vehicles.
China could see its gasoline demand slump by as much as 5.5% this year from 2025, GL Consulting said in its latest forecast reported by Bloomberg last week. Before the war, the China-based consultancy had expected a 5.2% decline in gasoline consumption for 2026.
The expected 5.5% drop in Chinese gasoline consumption would be the second-steepest slump on record, following the 2022 plunge when China was still under severe Covid-related lockdowns.
The increase in gasoline prices, despite government interventions in the sector, is discouraging driving of conventional cars with internal combustion engines, especially in many cities where EVs are more convenient and cheaper ways to move around.
By Charles Kennedy for Oilprice.com
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