China’s energy planners are ready to take the bitter pill of an unpopular nationwide fuel tax to put the brakes on runaway fuel demand in the world’s second-biggest oil consumer.

Analysts say Beijing is likely to consider a 20-50 per cent tax on retail gasoline and diesel prices, which are among the world’s lowest, emulating western Europe’s policy of using high taxes to promote energy conservation and protect the environment.
But imposing a tax at a time of record-high oil prices could hamper key economic sectors and anger the country’s hundreds of millions of farmers, consequences which may delay any imminent implementation despite a surging dependence on fuel imports.
“Beijing has well realised that the level of China’s energy use demands a high tax levy. It will not be imminent but will be soon — in a year or two,” said Yang Fuqiang, the Beijing chief of the US-based Energy Foundation, which assists China in formulating sustainable development policies.
Analysts say China may opt to introduce the new tax in phases to allow consumers to gradually adjust to higher costs and avoid any big negative impact to business and industry.
But Beijing would have to boost prices by at least 25 per cent to make a perceptible dent in demand, they say.
China’s oil imports hit a record in 2004, making up more than 40 per cent of its 6.4 million barrels per day (bpd) of demand. That dependence is set to rise to roughly 65 per cent by 2020.
Swelling car ownership, sharply growing transport and petrochemical sectors, and a persistent power shortage drove consumption up almost 16 per cent last year.
Demand remained robust despite international crude prices soaring past $50 a barrel as Beijing kept a rigid cap on retail prices to keep inflation in check and protect consumers.