THE country’s oil product prices should closely track global markets within two years but will not be fully liberalized before the end of this decade, an analyst from a top government think tank said Thursday.

Deng Yusong, from the Development and Research Council, also said he expected the government would keep control of natural gas prices for a longer time.

China has pledged to free up State-set energy prices as part of a drive to boost efficiency and curb demand growth, but it doesn’t have a timetable because of concerns about inflation and unrest.

Prices for refined oil products, such as gasoline and diesel, languished far below international levels for most of the last two years, after soaring markets pushed the government to abandon a pricing mechanism that was supposed to keep the two roughly in line.

A retreat in global prices has meant they are more or less back in step, and the government now uses a price setting formula based on crude costs plus a set margin for its long-suffering refiners.

A top executive at China National Petroleum Corporation, the country’s top oil and gas producer, told reporters earlier this month that he hoped prices would be freed up within two years.

Asked if this was a realistic schedule, Deng said: “This should be enough time to resolve the main remaining problems.”

“The international and domestic prices are now basically in line. For our next step ... we haven’t actually got a detailed draft yet of how it will work,” he told the IBG Company China Oil and Gas Summit in Beijing.

However although international and domestic markets would be closely linked, the government is unlikely to relinquish all control over prices until the end of the decade at the earliest, Deng said.

The power of Sinopec and PetroChina, the two majors which have a virtual duopoly over the country’s refining sector and control a large portion of the retail market as well, was one obstacle to totally freeing up prices, he said.

The two companies are State-owned and have recently been swallowing refining losses to keep the country supplied with fuel — but if they were allowed to set their own prices in an uncompetitive market, consumers could suffer, he added.

He also said China was considering changes to its pricing system for renewable energy, which foreign investors say sets prices too low to foster development beyond government-mandated development quotas.

(SD-Agencies)