Although oil prices have climbed 50% since the beginning of the year, the price increase to the consumer in China has been only 15%. Does that sound good to you? Think again.
Hours-long queues have formed outside police-guarded stations
pumping rationed oil in the export hub of Guangdong, fraying tempers --
an indication the majors may make Beijing face up to their problems
with the threat of what it fears most: social unrest.
As
shortages worsened, the country's top planners at the energy
policy-setting National Development and Reform Commission (NDRC) called
in oil firm CEOs and other top officials to discuss the future of its
pricing system last weekend, media reported.
Fearing inflation, which was a factor behind the Tiananmen Square protests, the NDRC has enforced price controls. As a result, China's oil companies lose money on sales in the domestic market. Naturally, they're exporting their product, resulting in a fuel shortage at the pumps.
China's refiners have made little public push for change, but the
growing petrol queues this week pushed the official China Daily, to
publish a rare and stinging rebuke to the NDRC, calling for prices to
be more closely linked to market fluctuations.
"The
inefficient oil pricing mechanism regulated by the NDRC is... the
underlying cause," it said in an editorial titled, "As pumps run dry it
is time for pricing reform." ($1=8.100 Yuan)
When the China Daily takes you on, you can be pretty sure the system is broken. The expected fix?
The most likely result is replacing changes that usually come at
least a month apart, with more frequent adjustments linked, but not
slavishly tied, to international fluctuations, analysts say.
"They have to deal with the issue of full liberalisation versus this
kind of price control, but I think -- as usual -- they might be doing
something in between," said Kang Wu, a fellow at Hawaii's East-West
Center.
We may be paying $2.50+ at the pump, but at least we're not reliving the 70's nightmare of gas lines.
In more China oil news, after giving up on a bid for Unocal, China National Petroleum Corp. has made a bid to purchase PetroKazakhstan. Also, this young man in Pucheng, China demonstrates the preferred method for filching natural gas, on a bike no less. (via The Stalwart)