Economic Observer Online
Dec 14, 2011
Translated by Zhu Na
Original Article: [Chinese]

The Economic Information Daily (经济参考报消息) reported today that diesel shortages are once again effecting large swathes of the country, with long queues for limited supplies of diesel appearing at gas stations in central, eastern, southern and southwest China. Analysts say that the severity of the shortages could increase over coming weeks.

In Changsha, the provincial capital of Hunan, a large number of privately-owned gas stations are displaying "no diesel" signs. According to people working at gas stations in the city, supply began to tighten about ten days ago, and it has become increasingly severe. As of the evening of Dec 11, some gas stations had already completely stopped supplying diesel, other state-owned gas stations have also started limited supply over the past week.

The situation is even more desperate among the gas stations that line the country's extensive freeway system. Some truck drivers have said the diesel shortages have become a common problem in central China. Long queues for diesel existed at gas stations located along the Changsha and Xiangtan sections of Beijing-Hong Kong-Macao Expressway, some as long as 2 kilometers.

Some drivers said the diesel supply in northern areas is fine, but as they head further south, they noted that the situation gets worse and worse.

The report also notes that 20 public buses in Changsha have been forced to temporarily stop running due to the diesel shortage and that long-distance trucking companies that operate along the Beijing-Hong Kong-Macao Expressway have also been hit hard.

Analysts say that as the international price of crude oil has remained at a high level for a long period, this has affected the profit margins of the major refiners and has decreased their motivation to refine oil and offer diesel to the domestic market.

As most companies engaged in the wholesale trade of diesel have already met their annual sales targets, many have started to reduce supply in order to avoid any sudden drop in oil prices. A second factor is that they are also limiting supply in order to ensure they have enough diesel during the upcoming peak transportation season over the Chinese New Year.

Other analysts say that in contrast to the eastern and southern regions, the diesel shortages in central and southeast are mainly due to difficulties in transporting the diesel, noting that transportation along the middle and upper reaches of the Yangtze River is impacted by seasonal factors.

Large parts of China also experienced diesel shortages in October and November last year, though at the time, most analysts said that the shortages were caused by energy restrictions, imposed in a bid to ensure that energy-intensity goals were met, which led to many high-polluting and energy-intensive industries switching to diesel-powered generators to keep their business going.

Diesel shortages in some areas of the middle and lower reaches of the Yangtze River were also reported in November this year.