China's refined oil pricing mechanism is playing a crucial role as a "stabilizer" for the national economy, effectively cushioning the country against the impact of volatile international markets, said industry experts.

As geopolitical tensions in the Middle East continue to disturb global crude supplies, China's policy of setting specific adjustment cycles and price boundaries has become a vital tool in smoothing out external shocks.

By moderating the transmission of international price spikes to the domestic market, the government is effectively suppressing the risk of imported inflation at its source, particularly as geopolitical tensions in the Middle East drive global crude toward higher price brackets, said Lin Boqiang, head of the China Institute for Studies in Energy Policy at Xiamen University.

The comments followed an announcement by the National Development and Reform Commission on Tuesday, stating that domestic retail prices for gasoline and diesel will be raised starting Wednesday — but at a significantly lower rate than market trends would suggest.

Since midnight on Tuesday, gasoline and diesel prices have increased by 420 yuan ($58.5) and 400 yuan per metric ton, respectively.

Global oil prices fell sharply after the United States and Iran agreed to a conditional two-week ceasefire deal that includes the reopening of the key Strait of Hormuz waterway. However, prices remain higher than before the conflict started in February.

"China's strategy not only stabilizes energy cost expectations for businesses and households, but also provides a predictable environment for economic operations amid rising global uncertainty," Lin said.

"The policy allows logistics and manufacturing firms to forecast energy expenses with greater certainty than in markets with instantaneous price transmission, acting as a vital stabilizer for national growth targets while ensuring that energy costs do not become a bottleneck for industrial output even as external uncertainties persist."

Under the standard pricing mechanism, which tracks global crude movements every 10 working days, the sharp rise in global prices since late March would have necessitated a much steeper hike of 800 yuan per ton for gasoline and 770 yuan for diesel.

The NDRC emphasized that this moderated approach is designed to balance the need for supply security with the financial endurance of downstream users.

The move aims to avoid excessive impacts on downstream sectors while appropriately reflecting the rising costs of imported crude oil to ensure a stable domestic supply, it said.

A key component of China's protective mechanism is the price "ceiling" and "floor" system. If international crude prices exceed $130 per barrel, domestic fuel prices will either not be raised, or will be raised by a reduced margin to protect the real economy.

To bolster this "stabilizer" effect, the NDRC has coordinated with major State-owned oil giants — China National Petroleum Corp, China Petroleum and Chemical Corp, and China National Offshore Oil Corp — to optimize production and logistics, ensuring the market remains well-supplied.

China's major national oil companies are implementing a multipronged strategy to safeguard the nation's energy security, including diversifying the supply chain to mitigate external logistical risks and maximizing output of its coal-to-liquids facilities as an alternative energy source.

Local authorities have also been directed to step up market supervision to prevent price gouging or violations of the national pricing policy.

Dong Xiucheng, a professor at the University of International Business and Economics, believes that maintaining the continuity and predictability of such macro policies will be essential for supporting China's "steady growth" targets as the global energy landscape remains unpredictable.

The intensity of national fuel price regulations has balanced both market supply security and the endurance of downstream users, said Dong.