China has raised taxes on oil products from December 13, the second increase in a month, state media reported.

Tax on gasoline, naphtha, solvent oil and lubricating oil has risen to 1.4 yuan (about 23 U.S. cents) per liter from 1.12 yuan. The levy on diesel, jet fuel and fuel oil will be increased from 0.94 yuan per liter to 1.1 yuan, according to the Ministry of Finance (MOF) and the State Administration of Taxation.

The increase involves other petroleum products including naphtha, lubricating oil and jet fuel. A statement on November 28 exempted small-displacement motorcycle, tire and ethyl alcohol from the tax to reduce burden on low and middle income group.

Retail prices of gasoline and diesel will be reduced by 170 yuan and 400 yuan per tonne after adding the higher tax, the National Development and Reform Commission (NDRC) announced in a separate statement.

This is a signal of tougher policy on energy saving and emission reduction, State media Xinhua cited Liu Shangxi, director of the research institute for fiscal science at the MOF, as saying.

Retail fuel prices have been cut for ten times since July as the government reacts to lower crude prices on the global market.

The adjustment will offset the drop in the price of crude oil and analysts estimate that fuel costs for drivers will remain flat after the move.

Zhu Qing of Renmin University of China, believes that heavy tax on the products that harm the environment is a global trend, noting the average tax on oil products hit $0.67 per liter in the 34 OECD countries with the highest as much as $1.4.