China diesel rationed, despite government pledges

Gas stations on China's booming east coast were rationing diesel, pump attendants said on Tuesday, despite Beijing's insistence that its refiners will ensure supplies at unprofitable state-set prices.

"The line outside our station is at least one kilometre long," said one station manager in coastal Fujian province, who declined to be named because fuel supplies are a sensitive issue.

Other stations said they had sold out of the day's supply by noon and did not know if a delivery would arrive on Wednesday.

Down the coast in Guangzhou province, China's manufacturing hub, diesel was rationed to 300 yuan ($42.56) for cash sales -- enough to fill up a family car but just a small portion of a truck tank -- and there were queues of up to 20 minutes.

The government said late on Monday that fuel supplies were adequate and that reports of rationing reflected only sporadic problems caused by demand from farmers planting their spring crops and the lingering impact of unusually severe winter weather.

"Supply tightness, even queues and rationing, in southern China was partly due to rising needs in the spring season as well as more demand after the harsh winter weather," the National Development and Reform Commission said in a statement.

Hoarding in expectation of price rises may have exacerbated shortages, but overall supplies were good as domestic oil product stocks had risen 28 percent from the start of the year, and the country's oil majors would ensure supplies, the commission added.

But as rationing and queues spread inland and to the country's financial centre, Shanghai, there were echoes of last October's supply crisis, China's worst in four years.

Last year, in the face of large refining losses, majors PetroChina <0857.hk> and Sinopec <0386.hk> curbed runs and cut supplies to the market, creating shortages across the nation that forced the government to increase state-set fuel prices.

With international crude prices climbing briefly above $110 a barrel this month, refiners were again selling at tens of dollars below the level that would allow them to break even on processing.

But Beijing is reluctant to raise fuel prices because inflation is at its highest in more than a decade, and earlier this month promised there would be no increases in the short-term.

SHANGHAI SHORTAGES

In Shanghai more than half of 15 PetroChina or Sinopec branded stations contacted by Reuters, in both the city centre and suburbs, said they were rationing sales or had run out of diesel entirely and were not expecting new deliveries.

"Diesel shipments are spotty. Now we are out and don't know when the next one will arrive," said one downtown attendant.

Some retailers from inland Anhui province said they hadn't recovered from the supply crisis in 2007, while others were once again rationing or sold out of diesel.

"We haven't sold diesel since last year's shortage," said a staffer at an independent station in the provincial capital Hefei.

Even in the capital, which the oil majors usually try to shield from shortages because it is the seat of government power, pumps of at least two PetroChina stations had run dry by mid-afternoon.

"Our diesel stocks ran out in the afternoon after some 20 large trucks rushed in for it," an attendant said at one. "We only have some reserved for prepaid customers."

In neighbouring Hebei province there were shortages too.

"Due to tight resources, we allow only 200 yuan each fill for nearly two weeks," said an attendant at a Sinopec station near the provincial capital Shijiazhuang.

In central Henan province, drivers faced even lower quotas, with some Sinopec stations in the capital Zhengzhou allowing only 100 yuan for each fill paid in cash.

($1=7.048 Yuan)