On August 11, crude oil futures price at New York Mercantile Exchange (NYMEX) saw fresh records one after another and ended at US$65.84 per barrel, the highest since the first trading in 1983.

China's National Development and Reform Commission also raised once again the ex-factory price of gasoline and diesel to record high by 300 yuan and 250 yuan per ton respectively. The market demand and supply and the orientation of prices momentarily became the focus of various parties' attention. How much exactly will the prices go up in a certain period of time?

China's domestic oil prices are adjusted with reference to those in the international markets. The International Monetary Fund predicts a still relative shortage of global oil supply this year. Initial forecast is NYMEX crude oil futures price to be around US$55, up 30 percent year on year.

In the second half of year, international oil prices will stay high and China's domestic market will face a shortage of refined oil product, says Chen Qiang, senior economic advisor with the State Information Center. Chen says there is still possibility for domestic oil prices to go up as well as room for uplift. Niu Li, another economic advisor with the State Information Center holds that there does exist possibility for domestic oil prices to grow but the room is limited since international oil prices have been at a high level.

Statistics from the National Bureau of Statistics show, in the first half of 2005, China's gross production of crude oil was 89.797 million tons, a year-on-year growth of 4.8 percent. In the same period, China's crude oil import grew by only 4.1 percent to 63.552 million tons and the growth rate was 35.2 percentage points lower than one year earlier.

Based on this, insiders hold that although continued oil price hikes in international markets do restrain China's crude oil import, on the whole, however, crude oil supply is sufficient on the domestic market so there will be no widespread oil shortage. Isolated tense supply of refined oil product in some regions is mainly the result of "domestic price lower than the international", which holds back the production capacity of domestic oil refining enterprises.

Sources say, in view of the capacity of the general public, China has not integrated its oil price with international markets, but takes measures to limit domestic oil price. Despite increasing times of growth, the domestic oil price sees expanding difference from international markets. That leads to prices of refined oil products lower than that of crude oil in the country, a phenomenon that seriously dampens the enthusiasm of domestic petroleum processing sector in production and sales.

To tackle the problem, China will launch reform on the price-forming mechanism of refined oil product to transform the price from retarded to real-time, according to Cao Yushu, spokesman with the National Development and Reform Commission on July 9.