China should adjust oil product prices more frequently and leave wider price fluctuation range for oil refineries to closely align up with international oil price, suggested Dr. Deng Yusong with Development Research Center of the State Council.

    This will effectively suppress speculation activities of productoil wholesalers and retailers and ease tight supply through slashing the lag of domestic price adjustment, said Deng.

    Deng pointed out streamlining the price level with benchmark pricedecided by the government price regulator should be the first step for China to embark on the oil product price reform.

    The falling international crude oil price, which tumbled near 100 U.S. dollars a barrel for the first time in five months on Thursday, is generally believed to be a good opportunity for China to reform its oil product price.

    The second step of the reform should be introducing more market participants to the national petroleum industry to let oil product price decided by market, while reinforcing governmental regulation, Deng said.

    Currently Chinese oil market is dominated by duopolies of PetroChina and Sinopec.

    China had started considering the oil product price reform as early as in 1998, forming a reform idea of unifying the domestic oil price with international one, keeping domestic oil price stable relatively and rationally adjusting the interests of all parties. But the market-oriented oil pricing reform plan has been suspended since the second half of 2004, owing to the soaring international oil price.

    As of now, the central government pays high priority to the stability of domestic product oil prices due to concerns on economic growth and inflation.

    Deng holds that consumers concern the average price of product oil but not the frequency of price adjustments.

    Now, China's national economic planner National Development and Reform Commission (NDRC) controls the price setting and adjustment of product oil, with oil companies having little freedom to adjust prices.