China rations diesel again a week after price hike

November 12, 2007 - 0:0

BEIJING (Reuters) -- China's state refiners are rationing diesel again at petrol stations on the booming east coast just a week after shortages made Beijing hike fuel prices by 10 percent, industry officials and clients said yesterday.

The shortage that occurred in at least three coastal provinces stoked fresh speculations that Beijing may need to further lift its regulated prices to appease loss-making refineries and bring in more imports to boost stocks.
Petrol stations in eastern city Ningbo run by Sinopec Corp. or PetroChina either put out signs ""diesel ran out"" or made lorry drivers queue for hours for a maximum refill per visit of 200 yuan, or just under 40 liters, drivers told Reuters.
At some outlets, policemen helped maintain order as angry drivers refused to hand over the hose when the gauge hit the prescribed limit, a driver surnamed Guo said.
Chen Xiaoxiang, a manager at a logistics firm, said he suspected operators were hoarding oil in anticipation of more price rises.
""Everybody says that prices are going to rise again, that's probably why these stations are holding back supplies,"" he said.
Some independent petrol stations were illicitly quoting their pump rates at 6.19 yuan per liter, or 20 percent above the government-set retail rates, implying market speculation for another price increase by that margin, industry officials said.
Sinopec fuel marketing officials in eastern Shandong and southern Guangdong province reached by Reuters said sporadic diesel rationing was also taking place in their regions, both manufacturing hubs and top fuel users in the country.
Following weeks of widespread shortage in most of October, China lifted retail prices of gasoline and diesel from Nov.1, after it held off for 17 months because of concerns the rise would stoke already high inflation and popular resentment.
State refiners resumed normal supplies almost immediately after the price increase, but its effects have worn off quickly. As global oil charged towards $100 a barrel, industry officials said the 10 percent rise was too small to narrow the gap with international markets, leaving refiners still in the red.
The adjusted diesel prices remained a third below Singapore rates though gasoline is now on par with what U.S. motorists pay.
""We haven't seen supplies improve significantly,"" said a Sinopec executive based in Jiangsu province.
""The total amount of supply is short as many local plants are still losing money at this oil price,"" said a Sinopec official based in southern metropolitan Guangzhou.
Even as China is boosting diesel imports to a three-year high, officials said that amount may still be too little to cover the shortage as refiners cut back production to trim loss.
Beijing may have to raise prices further to persuade the country's independent oil processors -- privately or locally owned that supply up to 15 percent of the world's second-largest oil market -- to reverse drastic production cuts implemented in response to record high world oil prices.