China: A stimulated diesel shortage

Diesel shortages are striking across China from southern Guangdong to the northern Tianjian. Long queues of trucks and cars stretching over one kilometer long have appeared at some gas stations; and at one point, diesel was rationed to 300 yuan (US＄42.58) for cash sales – enough for a family car but too small a portion for a truck tank.

The rationing comes as rumors spread that oil giant Sinopec and PetroChina were applying for government approval to increase fuel prices. To quell panic and public concern, the National Development and Reform Commission posted a statement on its website saying price hikes would be unlikely in the short run.


According to the senior management of Sinopec and PetroChina, the diesel supply remained stable in the domestic market and the reserves were at a reasonable level to prevent the recurrence of shortages during the severe snowstorm earlier this year.

Official statistics revealed that China’s oil production rose 10.5% year on year in the first two months of 2008, and reserves up 28% compared with year-end; while the diesel stocks increased 46%.

In the meantime, the export of oil products has increased at a faster pace than imports, especially in southern China. Last year, the import of oil products in Guangdong declined 18% while exports increased 47%.

All signs point towards sufficient supply. However, as the Chinese government adopts price intervention on oil products, state-owned Sinopec and PetroChina are obliged to refine, produce and sell oil products at fixed charges despite the surging global oil prices, consequently the two companies claimed to have suffered billions of yuan in losses.

EEO