China will increase its fuel output and crack down on hoarding to bring the nation's tight oil supply back to normal, the National Development and Reform Commission said yesterday.

 

"Since October, some areas have seen diesel in short supply due to surging global crude oil prices and rising consumption before the forthcoming winter. Some refineries are also not running at full capacity which puts more pressure on the oil supply," the NDRC said in a statement on its Website.

 

To cope with the situation, the nation's top planner said it will get China Petroleum and Chemical Corp and China National Petroleum Corp to obtain diesel supplies from more sources and distribute them rationally.

 

All refineries will lift their efficiency and production will run at peak capacity by delaying maintenance work and reducing the refining of industrial oil so that home, transport and public utility supplies will be guaranteed.

 

The two dominant state oil companies will be urged to cooperate with the regional refineries in Shandong, Shaanxi and Sichuan provinces, and provide more crude oil to them and at the same time purchasing more of their refined products.

 

Key areas including Shanghai, Beijing, Tianjin and Guangdong Province, as well as locations along major highways, will have to ensure that enough fuel is available.

 

As well the CNPC will deliver 20,000 tons of diesel to Yunnan Province and another 7,000 tons to Guangxi Zhuang Autonomous Region where serious shortages of fuel have been reported.

 

China will reinforce its market supervision and take action on hoarding and overcharging.

 

"With these measures, China's fuel supply will be normal again very shortly," the statement said.

 

Crude prices, expected to hit US$100 per barrel soon, have exacerbated losses for Chinese refineries as the refined oil product prices are set by the government.

 

China raised retail fuel prices by up to 10 percent on November 1. The national base price of diesel was increased from 5,020 yuan (US$669) to 5,520 yuan per ton.

 

But this is a long way from bridging the domestic price gap with that of the global market.

 

Chinese refineries can only break even when crude oil is below US$65 a barrel, officials said. But by yesterday light sweet crude oil for January delivery had already risen to US$97.7 a barrel in electronic trading on the New York Mercantile Exchange.

 

Last Monday, Shanghai raised the price of bottled liquefied petroleum gas for private use to ease pressure from the global surge in oil prices.

 

(Shanghai Daily November 28, 2007)