China fuel shortage may persist in 2008 -industry

BEIJING, Dec 21 (Reuters) - China may again experience a fuel shortage in 2008 if Beijing maintains a tight lid on domestic oil prices, an industry association said, a situation likely to keep the country's diesel imports high.

The world's second-largest oil market suffered through widespread diesel rationing in October and November, after refineries cut output to stem looses as global crude prices surged above $90 a barrel.

"If refined oil prices are not freed up and crude prices stay high, private refineries will continue to stand and watch, leaving the supply burden on two state companies," the China Petroleum and Chemical Industry Association said on its Web site www.cpcia.org.cn.

"New refining capacity will not be ready immediately, (existing) plants are unable to carry out thorough maintenance, making safe operation the weakest link in the supply chain."

CPCIA has the support of retired top executives of state oil giants Sinopec Corp (0386.HK: Quote, Profile, Research) and PetroChina (0857.HK: Quote, Profile, Research), the Web site shows.

China's independent oil processors, supplying 10 to 15 percent of the country's 7.5 million barrel-per-day market, had cut production drastically, a main factor behind the supply squeeze that eventually forced Beijing to raise pump prices in November, the first increase in 17 months.

State refiners had to boost diesel imports to nearly record levels, second only to the United States, supporting global prices at a time of peak winter demand. (For details see [ID:nSP24624]) (Reporting by Chen Aizhu; Editing by Edmund Klamann)

Reuters

Happy Holidays,

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