10/31/2007, 00.00
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Petrol crises hits Chinese boom

While the price of petrol per barrel continues to climb the government orders a price freeze to block inflation. Hunger for energy is weak point of Chinese economy.

Beijing (AsiaNews) – The price of petrol and the government’s attempts to stop inflation are at the roots of the drastic petrol and kerosene rationing at petrol pumps. Even in the capital many stations of the state Sinopec are rationing their supplies.

The rations have been in vigour for some time now in the rich coastal areas: Guangdong, Fujian, Jiangsu and Zhejiang. But it has now spread to poorer regions such as Anhui, Henan, and Hubei.

The problem is caused by the government’s reluctance to allow the selling price of petrol and diesel rise; for fear that an increase will result in a new wave of inflation hitting the poorest most. The last increase was made in May 2006.  The main point being that since then the price of petrol per barrel has risen sharply, hitting the 90 dollars a barrel roof.  The fixed state price covers a cost of 60-65 dollars per barrel, which means that the petrol companies are selling fuel at a loss. Many refineries have ceased activities and the lot of filling up gas stations has fallen exclusively to the state company Sinopec, whose multi-million dollar loss is covered by state subventions.

Sinopec, despite having increased productivity, has also warned that as of November it will be forced to close a refinery and reduce its production by 3%.  According to Reuters, the move may be a sign to the government to allow greater freedom in establishing petrol market prices.

The great Chinese economic boom has doubled energy requirements in recent years.  This is why the government and Chinese companies have waded into off-shore research for energy sources in the China Sea, African and Latin America, as well as nurturing relations with Middle Eastern nations rich in petrol.  Last year Beijing imported over 45% of its petrol requirements (4% up on last year. It must be noted that since ‘93 China has been considered a petrol exporter. 

For many analysts, the peak in petrol prices over a prolonged period of time could eventually lead to the collapse of the Chinese economic system, whose model for development is directly dependent on its energy resources.  One single example: in 2004 and 2005, faced with a 9.3% increase in gross national product energy consumption rose by 16%.



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