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| China-Japan-Koreas |
| China fuel crisis spreads - One Dead |
| 2007-10-31 |
| Last night, I was thinking my comment might require a little tin foil hat for complete understanding. Now I'm not as worried. China's worst fuel crisis in two years spread to the capital and other inland areas by Wednesday, and one man was killed in a brawl at a petrol station queue, upping pressure on the government to intervene. Diesel shortages in China's political heart, which escaped previous supply crunches unscathed, highlight tensions between the government and its increasingly independent oil firms about who should pay for the country's generous fuel subsidies. Top refiner Sinopec on Wednesday pledged more supplies and bought additional diesel fuel abroad, but it may fall to Beijing to end the stand-off by raising domestic prices, easing taxes, promising another year-end pay-off -- or simply strong-arming suppliers into selling more fuel at a loss. At stake are profits for oil majors Sinopec and PetroChina from selling motor fuel in the world's second-largest consumer, where pump prices have not been raised in 17 months even as crude costs hit a series of record highs. In scenes reminiscent of the weeks-long shortages in summer 2005, also caused by the yawning gap between domestic prices and global crude costs, petrol stations across the country were turning away trucks and rationing supplies. In Hefei, the capital of eastern Anhui province, independent suppliers had almost all run out of diesel and several controlled by the oil majors were rationing supplies, station workers said. Beijing worries that more costly energy could push up already-high inflation or spark unrest, and effectively forces its refiners and retailers to subsidize state-set prices. Diesel costs about 64 cents a liter at the pump in Beijing, versus around $1 in Singapore and $2 in Britain. But a recent rally in global crude prices to above $90 a barrel has deepened large firms' losses and made them ever more reluctant to keep markets supplied. After China's last major fuel crisis in summer 2005, when queues stretched for hours, Beijing cracked down heavily on a flow of exports that firms were using to ease their bottom lines, rescinding tax breaks, among other things. But this time round, with diesel exports just a tiny fraction of consumption, the shortages may be more difficult to solve without direct subsidies, price liberalization -- or a more overt political crackdown on the recalcitrant refiners. With current retail prices most plants only break even when crude is around $65 a barrel or lower, so soaring markets have forced many independents out of the market. The burden of making up the difference has fallen on the state-owned companies. Sinopec has raised imports and refining in November, and analysts expect it will get another tranche of cash from the government at the end of this year to offset its losses. Beijing gave it $1.2 billion in 2005 and $640 million in 2006. An industry source said Sinopec had bought another 30,000 tonnes of diesel for import in November to the hardest-hit southeastern coastal areas. And it will boost refinery runs by 800,000 tonnes next month, a company paper said. But a Sinopec official told Reuters on Tuesday that its largest refinery will switch off a crude unit in November and process 3 percent less crude than the previous month, sending a signal to Beijing in a move that could worsen the shortage. |
| Posted by:Nimble Spemble |
| #6 hey! How's that ANWR prohibition polling? Just asking, Donk assholes... |
| Posted by: Frank G 2007-10-31 21:41 |
| #5 With cost per barrel at $94 today, this issue could broadside the Presidential Election in a year. |
| Posted by: Grinetle6966 2007-10-31 20:53 |
| #4 No Blood for Oil.....oops, wrong slogan. |
| Posted by: Alaska Paul 2007-10-31 19:08 |
| #3 An off the top of my head list of places for riots, Iran China Indonesia Mexico Egypt/Jordan/Syria Pakistan/Bangladesh India? (Maybe John F would like to comment) |
| Posted by: phil_b 2007-10-31 19:06 |
| #2 That's their Achilles' Heel. |
| Posted by: bigjim-ky 2007-10-31 18:40 |
| #1 Before I read this, I was thinking that we are going to see food/fuel/inflation riots in vulnerable places. For the very simple reason that oil (and food) prices will continue to go up until we(the markets) achieve sufficient demand destruction, and that will be very painful in large areas of the developing world. |
| Posted by: phil_b 2007-10-31 17:52 |