* Gasoline at pump costs a quarter more than that of U.S.
* Fuel hikes force some to cut driving
* Slower GDP, higher prices to hit diesel demand
By Chen Aizhu and Judy Hua
BEIJING, March 27 China has hiked retail
gasoline prices twice in six weeks to a quarter more than those
in the United States, a move that's suddenly made Beijing's
metro an attractive option for 27 year-old accountant Liu Jia
who would normally prefer his Honda Accord.
Half way across the globe in the United States, the world's
top oil-consumer, the pain of high gasoline prices is being felt
George McNary, 43, a warehouse worker in Cleveland, Ohio,
recently traded in his dream vehicle - a 2010 Ford F150 truck -
for a 2004 Honda Civic, saying gas bills have become so
expensive that he felt "it was taking food out" of his kids'
Liu and McNary's disparate responses underscore the
differences between the United States, where high gasoline
prices are hurting President Barack Obama in an election year
and China, where only six in 100 people - similar to the U.S. in
the 1920s - own a vehicle and those six are likely to be quite
China may be the world's No. 2 oil consumer and have the
world's biggest vehicle market but current high oil prices are
unlikely to dent growth in fuel demand much or sales of
fuel-guzzling sports utility vehicles.
The country, which imports 56 percent of the oil it needs,
is set to lead global oil demand again this year by contributing
nearly half of the world's incremental fuel use, although the
pace has slowed. The International Energy Agency sees China's
oil demand growing 3.9 percent in 2012, or 370,000 barrels per
day to 9.88 million bpd, compared with a 4.9 percent rise in
Gasoline prices in China have climbed 10 percent higher
since February, with pump prices now at $1.20-$1.30 a litre in
most cities, as the government seeks to align rates closer to
global oil prices and curb excessive fuel burning.
This will cut some driving, but most consumers, like Liu
will only tighten the belt somewhat.
"I wouldn't cut down my daily driving for work because of
the hike. But prices this high do have a strong psychological
impact - that will limit my driving to only commuting for work,
not leisure," said Shen Yan, a journalist, who drives a Skoda
The price hikes will also to some extent help foster the use
of alternative fuels and promote the development of buses and
"As the oil supply pressure mounts, the government is
increasingly thinking of fuel substitutions and developing
public transportations in a big way," said Yan Kefeng of
consultancy Cambridge Energy Research Associates.
Methanol, ethanol and natural gas have risen to contribute
some 9 percent of total gasoline demand said Yan, resulting in
much slower growth in gasoline use relative to the surge in the
number of cars.
But demand for gas and cars is expected to keep climbing.
In a status-conscious society where sitting high above the
traffic in an expensive off-road vehicle has appeal, SUV sales
jumped 25 pct last year to 2.1 million vehicles, accounting for
almost 12 percent of light vehicle sales, according to J.D.
Power and LMC Automotive.
That is about half of the 4.1 million SUVs sold in the
United States, where SUVs were 32 percent of the light vehicle
The IEA expects China's gasoline demand to keep growing this
year, around 3.9 percent or 66,000 bpd this year after growth of
7 percent in 2011. But absolute levels are still low at around
one fifth of the 8.7 million bpd forecast for the United States
The price hikes are also likely to dampen growth in diesel
demand, already hurt by the slowing economy, although analysts
caution that sketchy data makes it impossible to quantify by how
Matt Parry, an analyst at Paris-based IEA, pegs China's
diesel consumption this year to rise 3.7 percent, or 125,000
bpd, compared to growth of 6.3 percent last year.
"The economy is going to slow and prices are going higher.
It's like a double whammy," he said.
Demand for diesel, used in trucks, power stations, railways
and ships, is more closely tied to exports and China's economic
performance than gasoline. Rising costs may also make Chinese
plants less competitive than their Indian counterparts, for whom
diesel costs are a third cheaper thanks to bigger subsidies.
"The bigger impact will be on diesel consumption for
industry use, which will translate into production costs and
damage corporate profits," said Frank Ye of Consultancy Chem1.
Automotive diesel -- burned mostly by trucks -- makes up
more than half of China's total diesel demand of 3.4 million
bpd, or a third of the country's total fuel use.
Compared to the mid-2008 when crude peaked at $147 a
barrel, diesel costs for China's lorry drivers have climbed 40
That has Wang Xiaoxiang, a manager of a small logistics firm
in eastern Zhejiang province who has seen freight shrink on
slowing exports since 2011, fretting further.
"We used to truck 50 tonnes of goods a day, now only 20, 30
tonnes...the ever rising diesel prices are just making things
worse," he said.