China Diesel Shortage Due To Demand, Not Pricing Regime – PetroChina

Diesel shortages in China are due mainly to demand, rather than problems with pricing, a PetroChina official said. 'The main problem for diesel supplies is the rise in demand,' said Jin Anyao of the company's retail division. He noted that shortages in Inner Mongolia and the northeast have been particularly pronounced because of the growing mechanization of agriculture. Jin played down the impact of price controls on the company's operations, saying that downstream refining was only one of 10 business segments.

However, he also said that the opening up of the price system was a 'necessity.' High crude prices and domestic price controls mean refiners operate at a built-in loss. These pricing distortions are thought to have caused smaller refiners to reduce or shut down operations, leaving the market largely to the majors, who have a mandate from the government to keep up supply. Another major domestic producer, Sinopec, said recently it plans to increase imports of oil products to prevent shortages of diesel and gasoline during the summer harvest and the Beijing Olympic Games.