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Energy: Time ripe for introducing fuel oil tax-Analysts

By Wan Zhihong (China Daily)
Updated: 2008-10-17 15:36

With the global crude oil price continuing to drop, some analysts said the time is ripe for China to introduce the long-discussed fuel oil tax.

"I believe it is right to introduce the tax while the international oil price is below $80 per barrel," said Zhang Peisen, a senior researcher with the Taxation Research Institute under the State Administration of Taxation.

Due to the global financial crisis, the international oil price fell below $80 per barrel this month. However, it hit a record high of $147 a barrel in July.

When the oil price is relatively low, the fuel oil tax will have less of an impact on domestic consumers, Zhang said.

Enforcement of the tax will result in price rises for fuel such as gasoline and diesel, he said. For instance, if the tax rate is 30 percent, a taxi driver in Beijing will pay around an extra 1,000 yuan a month for the fuel.

Zhang's view was echoed by Zhu Binggang, a member of the expert panel of PetroChina. "In recent years the global oil price has skyrocketed, which has become a major concern for the Chinese government when considering this new tax."

"But now, due to the financial turmoil, the price has fallen, and as the economic recession continues, the crude price will witness further drops," Zhu said.

The fuel oil tax was first proposed in 1994. In 2001 and 2002, The government said it would introduce the tax at an opportune time.

Without a fuel oil tax, China has instead been collecting road maintenance fees from motorists regardless of how much fuel they use.

Fee payments of more than 100 billion yuan are collected by around 300,000 Ministry of Transport employees every year.

China should introduce the fuel oil tax as soon as possible, so as to fully reform the country's energy sector," said Zhou Dadi, a researcher with the Energy Research under the National Development and Reform Commission.

"The aim of the new tax is to further boost energy saving and environmental protection in the country," he said.

Zhou said whether the global oil price is relatively low is not very important with regard to enforcement of the new tax. "When the oil price is high, it seems that the tax will increase the burden on consumers, but it will help people better realize the importance of energy conservation."

As the world's second largest energy consumer, China has seen rapid increases in the use of energy.

Nearly half of China's total crude oil consumption currently comes from imports. China imported nearly 200 million tons of oil last year, a 10 percent increase compared to 2006.

"China is not very rich in energy resources, and the fuel oil tax can help the country change the previous energy consumption mode," Zhou said.