49 “temporary” access to government and military preferential diesel prices, while the State Petroleum Reserve has access to preferential prices for all fuel types. Ex‐refinery prices are also set administratively for all fuel sales to these users.

A 17‐percent VAT and an excise tax are imposed on fuels. Between November 2014 and January 2015, the government took advantage of falling world oil prices and increased the excise tax on gasoline and diesel (Table 8).

**Table 8: Excise tax on gasoline and diesel in yuan (US$) per liter**

|Fuel|Before increase|Nov 29, 2014|Dec 13, 2014|Jan 13, 2015|
|---|---|---|---|---|
|Gasoline|1.00 ($0.16)|1.12 ($0.18)|1.40 ($0.23)|1.52 ($0.24)|
|Diesel|0.80 ($0.13)|0.94 ($0.15)|1.10 ($0.18)|1.20 ($0.19)|

_Sources_ : Government announcements.

The prices of LPG at the refinery gate and gas processing plants are limited nationwide to 92 percent of government and military gasoline rates, with wide price variation. Local authorities limit household LPG retail prices. Figure 5 shows the price of LPG for residential use in Beijing, which is low.

Rail, public buses, and inter‐island and rural passenger transport are eligible for a separate set of preferential fuel prices that must be set at least 400 yuan per tonne (about US$0.55 per liter of diesel) below the retail in each province. Provinces with large differences in distribution costs, such as Sichuan, can implement up to two additional pricing regions with prices higher than the provincial capital.

Various forms of compensation have been offered in times of high world prices. To help certain industries cope with fuel price increases, the government in April 2009 announced that it would subsidize public transportation, fisheries, and state‐owned forestry firms when the state‐set ex‐refinery prices for gasoline and diesel exceeded 4,400 yuan (US$700, or about US$0.94 per liter) and 3,870 yuan (US$615, or US$0.73 per liter) a tonne, respectively. When the ex‐refinery price of gasoline was between 4,400 and 5,480 yuan (US$870) a tonne and that of diesel between 3,870 yuan and 5,070 yuan (US$805), the central government would pay for all fuel costs above the threshold prices for individual fishermen or fishing enterprises operating inshore or inland, as well as state‐owned forestry and urban public transportation companies, and half of the surplus costs for rural road and water transportation companies and ocean fishing firms. Above these prices, subsidies are triggered, taking additional costs as a basis. In March 2012, the government announced a monthly subsidy of about 300 yuan (US$48) for taxi drivers across the country.

# Gas prices

Since 2013 until recently, China had a two‐tier pricing system for natural gas, consisting of two city‐gate prices: one for existing gas (91 percent of the total volume of gas in 2012) and the other for incremental gas. Incremental gas was priced at 85 percent of the import cost of alternative fuels (60 percent fuel oil and 40 percent LPG). The government took steps to move domestic gas prices closer to market‐based levels for non‐residential consumers by raising the prices of the existing gas, eventually reaching the level for incremental gas. Non‐residential gas prices were raised by 20.5 percent in September 2014, bringing prices to 2.35 yuan per m<sup>3</sup> (US$10.7 per mcf), or a 38.6‐percent increase from May 2013 prices.