In our recent Foolish oil outlook, we noted the detrimental impact that fuel subsidies are having on worldwide demand. Many countries have readjusted their rates to more closely reflect global prices. At first it looked like China would be a holdout, but even this prince of price-fixers is feeling the pressure.
China's announcement that it's immediately raising gasoline and diesel prices -- by 17% and 18%, respectively -- is a significant move, and the winners and losers are starkly clear.
The most obvious beneficiaries are the oil refiners, China Petroleum & Chemical (NYSE: SNP ) -- also known as Sinopec -- and PetroChina (NYSE: PTR ) . Without the ability to set prices for their retail products, these companies see their refining profits pickled when crude oil prices pop. The government actually paid Sinopec to compensate the company for its operating losses, so slashing the fuel subsidy actually saves the government money on multiple fronts.
Another big beneficiary of today's fuel-price adjustment is Gushan Environmental Energy (NYSE: GU ) . This company cooks up batches of biodiesel from waste vegetable oil. As noted in my first look at the company, margins have steadily contracted, but they're still incredible compared to the suckers using pricey petroleum feedstock. Today's price increase is pure gravy for Gushan.
Along with the diesel and gasoline increases, the Chinese government also decided to kick electricity rates up a notch as well. I think that's why you're seeing shares of utilities like Huaneng Power (NYSE: HNP ) powering higher today as well. On the margin, a higher electricity price also has to be good for solar makers such as Yingli Green Energy (NYSE: YGE ) , since their modules have an easier time competing at a higher price point.
The electricity price increase spares residential customers, not to mention agricultural players such as AgFeed Industries (Nasdaq: FEED ) , so that leaves big industrial players like Aluminum Corporation of China (NYSE: ACH ) to bear the higher costs. Chalco may not be cheering, but these price increases will help keep China from coming untethered from real-world commodity costs.
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