Oil shock hits China: Petrol, diesel prices raised for second time in weeks

China announced on Tuesday that it will raise petrol and diesel prices for the second time in just over two weeks, citing the impact of rising international oil prices driven by the ongoing war in West Asia.

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The price hike, set to take effect from Wednesday, comes after significant fluctuations in global crude oil prices following the escalation of the US-Israel-Iran conflict and the blockade of the Strait of Hormuz.

The National Development and Reform Commission (NDRC), China's top economic planner, confirmed the increase, which will see petrol prices rise by 420 yuan (USD 61) per tonne, while diesel prices will climb by 400 yuan (USD 58) per tonne. This follows a similar price hike on March 23, aimed at preparing for potential fuel shortages amid concerns about the war’s impact on oil supply routes.

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"The prices of gasoline (petrol) and diesel will increase as a result of the recent fluctuations in international oil prices," the NDRC said in a statement. "We have taken this step to stabilize the market and ensure the continued availability of supplies."

To manage supply disruptions, China’s three largest oil companies - China National Petroleum Corporation, China Petrochemical Corporation, and China National Offshore Oil Corporation - along with other refineries, have been instructed to maintain production levels and facilitate transportation of oil to stabilize supplies, according to the NDRC.

The NDRC also urged authorities to intensify efforts to crack down on activities that violate national pricing policies. "Relevant authorities should implement strict measures to ensure market order," the NDRC statement said.

While the price hikes are aimed at addressing short-term supply concerns, analysts note that China’s energy consumption and power generation mix suggest the country is less vulnerable to disruptions in energy supplies from the Strait of Hormuz.

Approximately 70% of China’s crude oil is imported, with 45% of those imports passing through the Strait of Hormuz.

Despite these concerns, China's diversified energy imports, including gas pipelines from Russia and long-term energy contracts with Moscow, offer some protection against supply shocks. China reportedly holds about four months' worth of emergency oil reserves to mitigate the impact of global disruptions.

Iran has restricted Hormuz, rupturing the energy supply to key Asian countries, including India and China.