Rising Demand Causes Diesel Shortages in China

Shanghai, June 4 (Gasgoo.com) The current diesel shortages in China are mainly caused by the rising demand, rather than the pricing, an official from PetroChina said on Monday. However, Sinopec said it will supply enough diesel and gasoline for vehicles of the summer harvest and the Beijing Olympic Games.

'The major issue for diesel supplies is the increase in demand,' said Jin Anyao of PetroChina's sales division. Shortages in Inner Mongolia and the northeast provinces have been particularly severe because agriculture in those areas is highly mechanized. Jin said the impact of price controls on the company's operations is not so significant, citing that downstream refining was only one of 10 business segments. However, "it is necessary open up the price system," he added.

High crude oil prices and domestic price controls will combine to make refiners operate at a loss. These pricing measures are seen as the major cause for smaller refiners to cut or shut down their operations, leaving the market liable largely to the refining giants, who have priviliges from the government to keep up their supplies.

Sinopec, another major Chinese producer of diesel, also said recently it has plans to import more oil products to guarantee its supplies of diesel and gasoline for vehicles of the upcoming summer harvest in rural China and the Beijing Summer Olympic Games.

The diesel shortages have worsened in China since last week, when gasoline stations in at least five provinces ran out of stock, but have not yet reached the fever pitch of last October. Some major coastal cities began to ration diesel last Thursday.

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