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Widespread diesel crisis unlikely for China

(China Economic Net)

16:59, November 04, 2011

Edited and translated by People's Daily Online

Beijing, Nov.4 (People's Daily Online) --An interview with Peng Yuanzheng, deputy president and general secretary of the China Petroleum Enterprise Association

Reporter: what is the difference between the current diesel shortage and those in recent years?

Peng Zhengyuan: Some regions used diesel to generate electricity in 2010 because of power shortages. To improve the safety of production, PetroChina, Sinopec and CNOOC have stepped up equipment maintenance since the start of 2011, which has affected diesel supply in the market. Furthermore, more market speculation has exacerbated the shortage in diesel supply over recent years.

Reporter: Which regions have suffered from diesel shortages? Will the shortage expand?

Peng Yuanzheng: The current shortage in diesel supply is still a regional issue and is mainly seen in northern and eastern regions and provinces such as Hubei and Hunan, with a moderate diesel shortage in Tianjin. Because household demand cannot be satisfied at this time, the diesel shortage is expected to continue in the near future.

Diesel has been also in short supply in Beijing and Shanghai. It is estimated that the scope of the diesel shortage will further expand over the next several weeks, but the shortage will gradually be eased. A long-term, countrywide diesel shortage at gas stations is unlikely to occur in 2011.

I believe that the diesel shortage will be alleviated after mid-November due to the end of refinery overhaul, the expected increase in diesel imports, greater government regulation and other factors. However, given the possible power shortage this winter and a surge in demand from power generators, diesel oil will again be in short supply around the end of the year.

Reporter: Why does China face diesel shortages almost every year?

Peng Yuanzheng: Diesel shortages occur almost every year for several reasons, including rapid and unbalanced growth in demand, overhaul of refineries, inventory replenishment, lack of reserves, and the contradiction between supply and demand intensified by price factors.

Overall, multiple factors have contributed to the diesel shortages in parts of China since the beginning of the fourth quarter. Due to the combined effects of multiple factors, if the supply from main oil producers drops, privately run gas stations will easily suffer from diesel shortages. Therefore, the current diesel shortages are simply a normal reflection of market forces and are not caused by hoarding among major oil companies' of their diesel fuel supplies.

Reporter: What measures do you think should be taken to solve diesel shortages?

Peng Yuanzheng: There are several effective measure, and increasing supply and reducing consumption is an obvious solution. First, refineries should continue to expand their diesel production capacity to increase diesel supplies. Second, a commercial refined oil reserve system should be built as soon as possible. Third, China should deepen the reform of its oil pricing system and make market forces play a greater role in the distribution of oil resources. Fourth, China should carry out the strategic task of developing innovative fuel-saving technologies and increasing fuel efficiency as the country transforms its economic development model.

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