China rations diesel as record oil hits supplies

October 27, 2007

BEIJING (Reuters) -- China is rationing diesel at pump stations in at least four booming coastal provinces in the widest-scale rationing seen since 2003, as red-hot global oil prices hit output at loss-making Chinese refiners.

With U.S. crude soaring to new highs above $92 a barrel on Friday, the supply squeeze is a telling sign that high oil is taking its toll on demand in the world's second-largest consumer by forcing refiners to limit output.
""We are rationing. Supplies are getting short,"" said a sales executive with top refiner Sinopec Corp. from east China's Jiangsu province.
Truck drivers reported long queues at petrol stations along a national highway linking Fujian and Zhejiang provinces, with each truck getting 100 yuan ($13) worth of diesel, or around 20 liters, per visit at a state-run station and 40 liters at a private kiosk.
Many in southern China's Guangdong province, China's manufacturing and export hub, suspended business due to the dearth of fuel, industry officials said. Central Hunan province also saw rationing in some cities and along a main highway, a local newspaper reported on Thursday.
The rationing, which started about a week ago, reflected official data released earlier on Friday that showed China's apparent oil demand nearly stalled in September with only a 0.3 percent rise from a year earlier, the lowest growth in 20 months, according to Reuters calculations.
""What's wrong with the oil market? Our drivers had to queue the whole night for only a small amount of fill, slowing the traffic by almost one day,"" said Gao Meili, who manages a logistics company.
""Why not just raise the prices? We are ready to pay a bit more if we can get the oil.""
Gao's comments hit the core reason for the supply squeeze -- Chinese refiners cannot pass the soaring crude costs on to consumers. Beijing fears stoking already high inflation and rigidly caps pump fuel rates to shield users from a 50 percent rally in global oil so far this year.
Asked if a price increase may be re-considered as oil jumped to all-time peaks, Sinopec Corp.'s investment relations chief Huang Wensheng said, ""Ask the NDRC,"" referring to the energy-policy maker, National Development & Reform Commission.
China last raised pump prices 17 months ago and its top economic planning officials have repeatedly signaled that a near-term price increase was not on the cards despite record-high oil.