The State Economic and Trade Commission, the watchdog for China’s industrial policies, has decided to apply a correction to the refined oil market by reducing the number of gas stations permitted amid fears that over-construction of gas stations along with an inefficient oil wholesale system will hinder oil trade’s development.

“Refined oil is a critical product of national interest. A market disturbance will hurt customers’ interests and hamper the economy’s sustained development,” Zhang Zhigang, vice minister of the State Economic and Trade Commission, said in a conference on regulating the refined oil market.

Relevant watchdog departments have been ordered to make a careful assessment of applications for new oil warehouses and gas stations. But the orders fall short of stating any nationwide management provisions to regulate the market.

Since 1999, over 500 gas stations have been established without ratification from provincial economic and trade commissions, as required. A lot of old stations privately have been rebuilt or expanded, as well, so the number may well have climbed over 25,000 each with its own pricing, accounting and oil stocking, without the benefit of overall economic direction. A modern chain system is called for to unit and coordinate their operations.

The inefficient distribution in such an uncoordinated collection of gas stations also drive costs up.

Over 2,500 oil wholesale enterprises, down from a previous 8,500, are excessive according to modern refined oil distribution system standards. Warehouses in these enterprises store oil in outmoded equipment while outmatching the market’s capacity.

Zhang Zhigang said that the commission will improve rules on market management and support gas station chain operations in ways that include assisting Sinopec (China Petroleum and Chemical Corporation) and CNPC (China National Petroleum Corporation), the two monopolies that dominate Chin’s oil market, find ways to remodel their gas outlets.

(CIIC 08/08/2001)