Diesel Shortages Reemerge In S. China - Some Companies Supplying Only Long-Term Contract Customers

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Oh, same old, same old. International oil prices rise, government-controlled prices don’t, and oil shortages proliferate across the Chinese landscape. In recent years this has become the refrain for China’s oil products market. Prices exceeded $115 a barrel last week, and a shortage of diesel fuel has hit southern China’s Guangdong Province. The latest previous diesel shortage occurred less than a month ago.

The Pearl River Delta seems to be a comfy birthplace for oil crunches. Since last weekend, the “No Diesel Now” signs have once again been hung out in front of gas stations in the Baiyun, Haizhu and Panyu districts of Guangzhou City. Other stations which still have supplies are crowded with all types of vehicles. Some stations say that they can now only sell to companies that have a long-term supply contract with them. The rest of China is wondering whether it’s all going to spread.

Interestingly, according to oil stock and production statistics from C1 Energy, an independent petroleum information provider, in March diesel stocks in China’s coastal areas reached their highest levels in recent years. In the past two months, China’s oil production increased by 10.5% over the same period last year. Oil stocks grew by 28% over the beginning of this year, with diesel fuel making up 46% of the total. Market analysts speculate that this shortage is being caused at least partly by suppliers who are unwilling to part from their diesel stocks at government-set prices.

The Chinese government compensates Sinopec and PetroChina, China’s two state-owned petroleum companies, by fiscal and taxation policies for any losses they incur in their domestic sales. The Ministry of Finance will also refund value-added tax levied on some of their imported oil products. The two companies have both applied to postpone paying a special windfall levy and cut the import tariff on oil products by 75%.

EDIT

http://www.chinastakes.com/story.aspx?id=327