"The steps that the Chinese took, although viewed by some as courageous, were exactly the right sort of steps to take," Bodman told a press briefing in the run-up to the Jeddah oil summit on Sunday.

China lifted petrol and diesel prices by more than 16 percent last week in a bid to reduce the gap with soaring cost of oil on international markets.

Asked if China's move would help the energy market, Bodman replied: "I think it will."

"When we say to move away from subsidies, we are not saying we want to eliminate subsidies tomorrow.

"We believe that all nations in the business of subsidising oil are in a very tricky position that leads to the possibility of what could be viewed as irreponsible behaviour.

"That is to say, if they are not taking steps over time to eliminate the subsidy."

Bodman said that around 30 million barrels per day of oil was consumed in nations that subsidise gasoline.

"That's simply too much. If there is anything that is clear, the world needs help in this regard."

Western nations led by the United States argue that many emerging Asian economies are artificially propping up record high oil prices with subsidies.

"The world has to move away from market-distorting, untargeted fuel subsidies that in my judgment make matters worse," Bodman said.