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Beijing's diesel oil supplies tighten up
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With winter approaching, Beijing is seeing its diesel oil supplies become tighter and tighter. Many local filling stations are not allowed to provide as much diesel fuel oil as their customers want. They must offer limited amounts of diesel to a restricted range of customers. Some filling stations beyond the fifth ring road, very far from downtown, have even been forced to cancel providing this kind of fuel because no supplies are available to them.

An anonymous employee with a state-owned filling station said that the sales restrictions were not out of their choice but rather came from mandatory orders from above. Another unnamed staff member working at a Sinopec-owned fuel station speculated that the current tight supplies of diesel oil resulted from artificial manipulation.

But privately owned filling stations are in an even worse situation because their oil supplies are gradually running out. Some people have even begun to cry that the oil crisis has finally arrived.

On October 30, a source inside Sinopec denied the existence of a so-called "oil crisis" and revealed that Sinopec's refineries such as Beijing Yanshan Petrochemical Co., Ltd. are in full production mode. The source said that the current situation was created by market supply and demand. 

Analysts agree. Wang Gang, an oil industry analyst from Great Wall Securities, said that Sinopec, the major domestic provider of oil products, is heavily relying on expensive imported crude oil, accounting for 60 percent of the total amount of crude oil that it needed last year. Due to the high costs of crude oil plus additional refining costs, the more products the company outputs, the larger the losses it suffers. Therefore, the firm has cut production, causing diesel oil supplies shrink.

But as winter draws near industrial sectors such as mining, transportation, construction and fishery are generating massive demands for more diesel oil, said Li Yu, an analyst with industry website

Some market analysts have even pointed out that China's two oil giants, PetroChina and Sinopec, would continue to experience hardships if the international oil prices continue to remain high and if China does not take measures to adjust the prices of oil products.

( by Pang Li, November 1, 2007)

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