China Hikes Fuel Prices Amid Shortages

Oil companies have blamed the shortages, which began last week, on a lack of refining capacity. Government controls have forced refiners to pay the difference between soaring market prices for crude and lower retail prices at the pump. Some refiners responded by cutting output. 

Consumers and some Chinese media have accused suppliers of creating a phony crisis to force Beijing to raise prices. 

Thursday's price increases are meant to narrow the gap with soaring crude costs, according to the National Development and Reform Commission, the country's main planning agency. It was the government's first fuel price hike in 18 months. 

The NDRC statement said prices would rise by 9.1 percent for gasoline and 9.9 percent for diesel, but said prices at some retailers could be up to 8 percent more than that. 

"To ensure the supply of domestic oil products and the promotion of energy conservation, the state decided to properly increase the prices of oil products," the NDRC said. It said the price rise also would apply to aviation fuel. 

Trucking companies say diesel rationing has slowed deliveries in Shanghai and areas along China's southeast coast that export manufactured goods to the United States and other foreign markets. A man was killed in a fight Wednesday after he tried to cut in line for gas in the central province of Henan, police said. 

Thursday's price increase marked the reversal of a September government order that froze prices of gasoline and other basic consumer goods to rein in rising inflation. 

The commission said it would try to shield the public from some of the increases. 

"Prices of railway tickets, natural gas for civilian use and public transportation will not be raised to reduce the impact of the price hikes on the public, and the government will provide subsidies for taxi drivers," the commission said. 

Chinese oil refiners are losing money due to low government-set retail prices for gasoline and diesel that prevent them from passing on record-high crude costs to consumers. Oil prices rose to new records above $96 a barrel in Asian trading Thursday. 

Some refineries have stopped processing to avoid losses. It was unclear whether the price increase would be big enough to make refiners profitable and open to increasing production. 

The government had resisted appeals by oil companies to boost prices, saying it wanted to avoid hurting China's poor, who already are struggling with a sharp rise in food costs. 

After Thursday's increase, Chinese motorists will pay about $3.20 per gallon for gasoline. Diesel prices rose to about $2.69 a gallon. 

The NDRC said the price hike was likely to add 0.05 percent to the country's monthly consumer inflation rate. 

Inflation hit an 11-year monthly high of 6.5 percent in August. It eased to 6.2 percent in September but the full-year rate is expected to be well above the official target of 3 percent. 

It said prices for railway cargo and airlines "need to be adjusted properly." 

The agency said it also plans to raise natural gas prices, but did not say when or by how much. 

China's No. 2 oil company, China Petroleum & Chemical Corp., known as Sinopec, defended its supply efforts Wednesday, saying in a statement that producers were "painstakingly organizing resources to get them to market" and also importing fuel. 

Sinopec said it would import more oil this month to "stabilize the domestic market" but gave no information on when the crunch might ease. 

China has risen in recent years to become the world's second-biggest oil consumer after the United States, propelled by economic growth that is expected to top 10 percent this year for a fifth straight year. 

Government oil companies have spent billions of dollars to secure access to foreign oil and gas, leading to criticism of their willingness to deal with such isolated governments as Iran and Sudan. 

Sinopec acknowledged that refiners that have suspended operations due to rising costs were partly to blame for the shortages. But it said they also were caused by mounting demand.