China's NDRC cracks down on fuel hoarding and illegal price hikes

Interfax
Posted: 2007-11-28 20:11:55

Shanghai. November 28. INTERFAX-CHINA - China's National Development and Reform Commission (NDRC) announced today that six service stations around the country were found to have engaged in oil hoarding and sold fuel at illegally inflated retail prices, demonstrating the government's latest attempts to manage the current diesel crisis.

The move is the latest in a series of efforts undertaken by the central government to rein in living and production costs for the country's economically vulnerable farmers and fishermen, who are already facing an inflation rate as high as 6.5 percent. The announcement came just one day after the country's top economic planner released a circular containing various measures aimed at easing the domestic diesel shortage.

The NDRC said in the circular that it has asked the country's two energy giants, China National Petroleum Corp. (CNPC) and China Petrochemical Corp. (Sinopec Group), to supply crude oil resources to independent refineries in the northeastern provinces of Heilongjiang, Jilin and Liaoning as well as Shandong, Shaanxi and Sichuan. Together, these provinces hold around 10 percent of the country's total refining capacity.

The smaller independent refineries are reluctant to resume oil refining activities despite a recent 10 percent hike in fuel retail prices as the cost of fuel oil, their feedstock for production due to their limited access to controlled crude resources, has risen drastically and cannot be offset by the 10 percent hike.

Through the notice, the two major state-owned energy companies have also been asked to purchase oil products produced by the local refineries.

The circular also said both CNPC and Sinopec Group have stopped rationing diesel supplies at service stations in the municipalities of Beijing, Tianjin and Shanghai as well as Guangdong Province, some of China's most energy-hungry financial and manufacturing bases. Service stations along key highways, such as the Beijing-Shanghai and Beijing-Zhuhai highways, have also been able to sell diesel without any such limitations.

This month, CNPC has increased diesel supplies to Yunnan Province by 20,000 tons and the Guangxi Autonomous Region by 7,000 tons, and Sinopec has lifted diesel supplies to the Yunnan market by 27 percent year-on-year in order to safeguard against any interruption in sugar production in the two regions. 

The NDRC said that it will continue its efforts to crack down on oil hoarding and illegal price hikes that have arisen due to speculation of a further government-led fuel retail price hike in the future.