China to raise retail gasoline and diesel price caps amid renewed Middle East conflict

• Gasoline prices will increase by 685 yuan ($101.54) per metric ton and diesel by 655 yuan per ton, with China's NDRC adjusting prices every 10 working days based on global crude prices
• High oil prices have significantly dampened fuel demand, with gasoline consumption down 15% year-on-year in April and still down 6.5% in July despite peak summer travel season
• State-owned refineries remain unprofitable with losses of 728 yuan per ton in July, though refining margins improved by 1,645 yuan month-on-month

Summary

Key Development:

China's National Development and Reform Commission (NDRC) announced retail price cap increases for gasoline and diesel effective Saturday, July 31, 2026, marking the second hike following renewed U.S.-Iran conflict and the Strait of Hormuz blockade this month.

Specific Price Changes:

• Gasoline: +685 yuan ($101.54) per metric ton (+14% from pre-war levels)
• Diesel: +655 yuan per metric ton (+15% from pre-war levels)
• Price caps had returned to pre-war levels on July 3 before this adjustment

Market Context:

The increases reflect sharp volatility in international crude oil prices driven by Middle East geopolitical tensions affecting the Strait of Hormuz, a critical energy supply route. China's NDRC reviews and adjusts fuel prices every 10 working days based on global crude prices, processing costs, taxes, and profit margins.

Industry Impact:

State-owned refineries' margins improved by 1,645 yuan per ton month-over-month in July but remained loss-making at -728 yuan ($107.90) per ton. Independent Shandong refineries showed positive margins of 146.48 yuan per ton.

Demand Destruction:

High oil prices significantly impacted consumption:

• April demand: down >15% year-over-year
• July gasoline demand: down 6.5% despite peak summer travel season
• Diesel demand weakened due to high temperatures and rainfall affecting industrial/construction activity

Broader Implications:

Rising energy costs in China, the world's largest commodity consumer, may further dampen economic activity and fuel demand while contributing to global inflationary pressures.