Business | Oil & Gas
China faces fuel shortages as pumps go bust
As China's neighbours succumb to soaring oil markets and cut back expensive fuel subsidies, Beijing is stubbornly refusing to let pump prices rise, driving some service stations to hike prices illegally or simply shut down.
- Reuters
- Published: 00:11 June 6, 2008
Beijing: As China's neighbours succumb to soaring oil markets and cut back expensive fuel subsidies, Beijing is stubbornly refusing to let pump prices rise, driving some service stations to hike prices illegally or simply shut down.
The emergence this week of forecourts selling diesel at well above the government's low official rate follows months of sporadic shortages, evidence of the subtle test of wills between Beijing and state oil companies forced to bear the cost of selling cheap fuel to keep inflation in check.
China has raised its pump prices only once in the past two years - a 10 per cent hike in early November - while world crude markets nearly doubled over the period, racing up to a peak over $135 per barrel in late May before retreating.
Facing losses on every litre of fuel they sell, state-owned refiners Sinopec and PetroChina prefer to sell as little as they possibly can, creating some shortages and putting pressure on Beijing to raise prices.
While India, Indonesia, Sri Lanka and Malaysia have all recently increased gasoline and diesel rates in order to ease the cost of subsidies, analysts say China will hold off until after the Olympics, meaning the stand-off may last months.
In the meantime, station owners struggle.
"We can't source gasoline and we can't make a profit from diesel," said a despondent worker at the Baoli Taide station, who had been selling the fuel for 6.8 yuan ($0.980) a litre compared with a maximum official retail price of 5.29 yuan a litre.
The manager of another station said they still get a small flow of fuel, but he didn't dare sell to anyone except trusted customers out of fear they will be reported for price gouging.
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