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China rationing diesel amid shortages blamed on price controls

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Frustrated truck drivers lined up to buy as little as a quarter-tank of diesel Tuesday due to shortages that one Chinese oil company blamed on price controls that it said discouraged new investment to expand refining capacity.

The shortages disrupted trucking in Shanghai and the export-driven provinces of Guangdong, Zhejiang and Fujian in the southeast, but the possible economic impact was unclear.

The Zhengda Transportation Co. in Guangzhou, China's southern business capital, now needs a week to get goods to Beijing instead of the usual three days as drivers hunt for fuel, said a manager who would give only his surname, Liu.

``We have to drive further to find another filling station,'' Liu said. ``Many goods are delayed in delivery.``'

Oil refiners are losing money because of price controls that block them from passing on soaring crude costs to consumers, and they have refrained from investing in expanding refining capacity.

``Domestic oil refiners already have suffered great losses, so they are greatly reducing production, even suspending it,'' said a statement by a provincial branch of China's biggest oil company, China National Petroleum Corp., quoted by the official Xinhua news agency.

The Communist government sets diesel and gasoline prices and has held them steady as crude prices climbed, forcing oil companies to shield the rest of the economy. The price of light, sweet crude for December delivery on the New York Mercantile Exchange hit a record high of US$93.80 on Monday but fell back slightly on Tuesday.

Authorities have rejected appeals from oil companies to raise prices, saying they want to avoid hurting China's poor, who already have endured sharp rises in food costs this year.

It was unclear how the shortages would affect key export industries.

``If it's temporary, then it will be nothing, but if it lasts for six months, then that will be a big problem,'' said Lehman Bros. economist Mingchun Sun in Hong Kong. ``The issue is that we don't know how severe it is or how widespread.''

Filling stations in Guangzhou also appeared to be short of gasoline, though the extent of the problem was unclear.

At one station, employees blocked the entrance at evening rush hour with a sign that said, ``Temporarily out of gas.'' They told a driver to return early the next morning. A clerk who refused to give her name said the station had been short of gasoline for two days.

``Usually I would buy the cheapest grade of fuel, but now I'll buy whatever they have,'' said a Guangzhou taxi driver who would give only his surname, Yang. ``I'm just glad I don't need to use diesel. They never have that anymore.''

In Shanghai, some stations limited customers to a quarter-tank, newspapers said.

``I have no idea when the situation will return to normal. We're not getting any supplies from our company,'' said an employee at a Sinopec Qibao gas station on Shanghai's west side. She gave only her surname, Dong.

China has become the world's second-largest oil consumer after the United States following an economic expansion that has topped 10 per cent for the past four years. Explosive growth in export industries and private car ownership are driving demand for fuel.

Businesses and some Chinese commentators accused CNPC and Sinopec of creating phony shortages to force Beijing to raise prices.

``This is because CNPC and Sinopec have applied to the National Development and Reform Commission for a price increase but it has not been accepted. So this is their attempt to force the NDRC to surrender,'' said the newspaper Orient Today, published in the central province of Henan.

It called on government-owned oil companies to ``give first priority to social interests'' instead of profit.

Phone calls Tuesday to the press offices of CNPC and Sinopec in Beijing seeking a response to the accusations were not answered.

Fuel shortages have been reported throughout the country, according to the China Chamber of Commerce for the Petroleum Industry, which represents oil companies.

Some 2,000 filling stations have closed for lack of supplies, the business magazine Caijing reported on its website.

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China rationing diesel amid shortages blamed on price controls
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