The price of domestic refined oil products will be substantially reduced starting Wednesday, based on its pricing mechanism, said the country's top economic regulator on Tuesday.

According to the country's current pricing mechanism for refined oil products which was first introduced in 2016, petrol and diesel prices would not be adjusted as long as global crude oil goes below $40 a barrel or above $130 a barrel. Under the pricing mechanism, when the global crude oil price falls below $40 per barrel, the incremental profit margin will be directed to a special risk reserve, which will allocate funds to oil product upgrades, the security of the oil supply, energy conservation and emission reduction.

China will adjust the prices of oil products every 10 working days to better reflect changes in the global oil market, said the National Development and Reform Commission during a news conference in Beijing on Tuesday.

As a major crude importer, consumer and producer, an oil price either too low or too high will both lead to negative impact on the country, it said. While a high oil price will impose a burden on oil consuming industries and consumers, a low oil price will jeopardize the normal operations of the domestic crude exploitation industry and further enhance China's dependency ratio on foreign oil.

The policy will help China enhance its crude quality, enhance energy security and protect itself against the drastic fluctuation of international oil prices, it said.