Oil prices a shared sacrifice

Premier Wen Jiabao's promise of oil sub-sidies for farmers came as Chinese drivers were already bracing themselves for another price hike at the pumps.

Drivers' complaints about the soaring costs of driving are predictable. But, with international oil prices already hovering above $100 a barrel and expected to average $130 in 2013, Chinese policymakers should not hesitate to raise domestic fuel prices to both curb excessive use of oil and provide an incentive for greater energy efficiency.

As the fastest-growing major economy, China's oil-dependence rate reached 57.5 percent in 2011. It would be increasingly difficult to ensure domestic supply if oil prices remained lower at home than in global market.

Though domestic gasoline prices reached a record level when they were raised in early February, it is widely believed that more price hikes are needed for the country to meet its energy-saving goals.

After managing to roughly meet its target to cut energy consumption per unit of GDP by 20 percent from 2006 to 2010, China is aiming to reduce its energy intensity by another 16 percent between 2011 and 2015. However, the country only reduced energy intensity by 2.01 percent last year over the previous year, far below the original target of 3.5 percent.

To a certain extent, the failure to raise energy efficiency as rapidly as planned can be attributed to the country's all-out fight against inflation last year.

With consumer inflation hitting a 37-month high of 6.5 percent in July, Chinese policymakers had little choice but to keep a tight lid on fuel prices.

Yet, with the increase in consumer prices slowed to 3.2 percent year-on-year in February, the lowest in 20 months, the country now has more room to advance price reforms.

Wen's promise of oil subsidies for farmers signals efforts to boost agricultural production even if international oil prices increase this year.

It also indicates the central authorities' resolve to make oil dearer. While higher oil prices will propel drivers and corporate users to reduce their energy use and protect the environment, farmers and other less-privileged social groups should be properly protected from the impact of oil price hikes.

Chinese drivers are blaming oil companies and dealers for their pain at the pumps. Some of the dealers are reported to have tried to boost their gasoline stockpiles by limiting supplies before an imminent price hike. This is something that the pricing authorities must respond to quickly.

After all, individual consumers should not be the only people asked to make sacrifices for a greener Chinese economy.