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Fuel shortage as crude oil prices rocket
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Some gas stations are limiting diesel sales as the nationwide fuel shortage starts to hit Shanghai.

Soaring crude oil prices are starting to have a big impact at a local level, as oil companies say they are doing their best to ensure supply.

An employee at a Sinopec petrol station near Lujiazui, Pudong, said many services stations uptown had been rationing diesel, with each vehicle only getting a quarter, or less, of its tank filled, per visit.

Most Shanghai pump stations selling diesel are located outside downtown.

Buses owned by travel agencies could be most affected while public buses should be immune as public transport operators usually sign long-term purchase contracts.

"Diesel supply is tight in town now as the shortage spreads," said Lu Xiangrong, a media relations official at Sinopec Shanghai Petrochemical.

"But we will allocate more supply to address the situation in town."

Fuel shortages were reported throughout China over the weekend, from southern Guangdong and Fujian to eastern Zhejiang and central Henan. Industry sources said the tight supply could last for another month.

The supply squeeze is due mainly to the surging world crude prices, which are making refineries in China unprofitable as domestic retail fuel prices are set by the government to check inflation.

A similar rationing was reported in booming Guangdong in 2003, with long queues at many pump stations.

Crude rose above US$93 per barrel for the first time yesterday in New York, and Gordon Kwan, Hong Kong-based analyst at brokerage CLSA Ltd, expects it could reach US$100 in coming days.

It is understood refineries choose to shut down some refining capacity for maintenance while crude costs are high. Sinopec is the largest refiner in Asia. According to a Reuters report, Sinopec is seeking another 60,000 tons of diesel imports for November after having bought the same volume in October, which will take its imports to an 11-month high to meet the gap.

(Shanghai Daily October 30, 2007)

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