An official with the State Administration of Petroleum and Chemical Industry, named Chen Yongwu, said his company can fully guarantee that the oil product supply and prices will not go up sharply this year.

Chen confirmed the petrochemical sector has used less than 60 percent of its oil refining capacity, "China Daily" Business Weekly reports today.

Chen's remarks were made after a shortage of oil products emerged during the four quarter last year which led to price increases.

The country's two oil giants, China Petro-chemical Corp (SINOPEC) and the China National Petroleum Corp (CNPC), have taken emergency measures. They have ordered their provincial branches tosize up markets in a rapid way, and to redistribute oil products among different regions swiftly.

To fill the market gap, the SINOPEC has suspended exports of refined oil since the end of 1999. Regional government officials have asked central authorities to lift a ban on imports of oil products, which was put into practice 18 months ago.

The shortage emerged suddenly just as China was moving towards implementing a major tax reform. According to the reform, several major taxes on motor vehicle owners are to be unified into a single fuel tax.

To re-allocate oil resources nationwide, SINOPECT and CNPC, which are rival firms, have firmly agreed to collaborate on the measures. The two giants hold about 90 percent of the country's total wholesale market for oil products.

SINOPECT and CNPC have launched investigations of their outletsas well as other marketing units to explore and deal with hoardingor illegal price gouging.

The current annual demand for oil products on China's domestic market is nearly 170 million tons, while production capacity amounts to some 260 million tons, Chen said.