Fuel shortages spread into central China

BEIJING: The worst Chinese fuel crisis
in two years spread to the capital and
other inland areas Wednesday, even as
the country's top refiner pledged to
guarantee supplies to a market crippled
by the gap between state-set pump
prices and record crude markets.
The shortages in the country's political
heart, which escaped previous supply
crunches unscathed, highlight rising
tensions between the government and its
increasingly independent oil firms about
who should pay for the generous fuel
subsidies in China.
"Sinopec will work hard to resolve the
diesel supply tightness," a banner
headline in the company paper
announced, but at least four of its stations in Beijing were rationing supplies.
In Hefei, the capital of eastern Anhui Province, independent suppliers had almost all run out of diesel,
and several run by the oil majors China Petroleum & Chemical, known as Sinopec, and PetroChina
were rationing supplies.
"We don't have diesel today. The supply has been quite spotty. Long lines in front of gas stations are
very common these days in Hefei," an independent gas station manager surnamed Yang said.
"Usually stations set a limit of 50 or 100 yuan worth of gas for each vehicle, on which trucks can barely
run," he added. Fifty yuan is about $6.50.
Rationing had already spread along the southeastern coast from the manufacturing hub of Guangdong
through Fujian, Jiangsu and Zhejiang provinces. But inland Hunan, Henan and Hubei provinces were
also struggling, local media said.
Zhengda Transportation in Guangzhou, the southern business capital, now needs a week to get goods
to Beijing instead of the usual three days as drivers hunt for fuel, said a manager who would give only
his surname, Liu.
"We have to drive further to find another filling station," Liu said Tuesday. "Many goods are delayed in
delivery."
State-set diesel and gasoline prices have not been raised since May 2006 because of government
concerns that pricier energy could push up already high inflation or spark unrest.
But with these retail prices, most plants can only break even with crude at around $65 a barrel or
lower. So as international markets climbed to records near $94 a barrel, they are ever more reluctant
to keep markets supplied.
The burden has fallen mostly on the state-owned companies. Sinopec, which for the past two years
has received hundreds of millions of dollars in year-end compensation from Beijing for losses, has
upped imports and refining in November.
It has bought another diesel cargo of 30,000 tons for November delivery, in addition to last week's
purchases of 60,000 tons, traders said Wednesday. And it will boost refinery processing by 800,000
tons next month, a company paper said.
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But a Sinopec official said Tuesday that the firm's largest refinery will switch off a crude unit in
November and process 3 percent less crude than the previous month.
"Domestic oil refiners already have suffered great losses, so they are greatly reducing production,
even suspending it," said a statement by a provincial branch of the country's biggest oil company,
China National Petroleum, according to Xinhua, the state-run press agency.
By cutting output during such a shortage, the firm may be sending a signal to the government that
even if it is publicly toeing the line, it wants controls eased on retail pump prices, industry officials say.
Filling stations in Guangzhou appeared to be short of gasoline Tuesday, though the extent of the
problem was unclear.
At one station, employees blocked the entrance at evening rush hour with a sign that said,
"Temporarily out of gas." They told a driver to return early the next morning. A clerk who refused to
give her name said that the station had been short of gasoline for two days.
"Usually I would buy the cheapest grade of fuel, but now I'll buy whatever they have," said a
Guangzhou taxi driver who would give only his surname, Yang. "I'm just glad I don't need to use
diesel. They never have that anymore."
In Shanghai, some stations limited customers to a quarter tank, newspapers said.
"I have no idea when the situation will return to normal. We're not getting any supplies from our
company," said an employee at a Sinopec Qibao gas station on the west side of Shanghai. She gave
only her surname, Dong.