Chinese oil companies promise more fuel

China's two main oil companies have promised to step up diesel production, the government said Tuesday, following two weeks of shortages blamed on price controls that have disrupted trucking and caused long lines at filling stations.

The government raised diesel and gasoline prices by about 10 percent last week to curb demand at a time when refiners say they are losing money due to controls that block them from passing on record-high crude costs to consumers. Some refiners have responded by suspending production, leading to rationing, especially in China's fast-growing south.

Executives of China National Petroleum Corp. and China Petroleum & Chemical Corp., agreed to expand refining and "ensure domestic supplies" after a meeting Monday with government officials, said a statement by China's main planning agency, the National Development and Reform Commission.

It gave no indication how long the changes might take to have an effect on supplies at the pump.

The shortages have forced truck and bus drivers to wait for hours at filling stations to buy a few liters of fuel. One trucking company said its delivery times have doubled as a result.

But economists say the shortages are unlikely to have an impact on China's overall economy unless they last for several months.

The government gave no indication Tuesday whether it would compensate CNPC and Sinopec for losses from the additional refining.

CNPC and Sinopec, both state-owned, are expected to act like profit-making companies but Beijing has forced them to shield consumers from rising world oil costs by holding down retail prices. That has pinched their earnings, even though the two companies have seen revenues soar due to China's economic boom and an increase in private car ownership.

On Monday, CNPC's publicly traded unit, PetroChina Ltd., briefly became the world's first $1 trillion company by market capitalization when its shares debuted on the Shanghai stock exchange and nearly tripled in value before falling slightly on Tuesday. PetroChina shares already were traded in New York and Hong Kong.

China suffered a less serious fuel shortage last year, also blamed on lack of refining capacity. Beijing prodded both major oil suppliers to increase supplies and made up some of their losses at the end of the year with a tax rebate.

Last week's price hike was China's first in 18 months. It also was a reversal from a government order in September that froze prices for gasoline, cooking oil and other basic goods in an attempt to rein in a surge in inflation.

Regulators had resisted earlier appeals by oil companies to raise prices, saying they needed to protect China's poor, who have seen food costs rise sharply this year.

Even after the increase, China's prices are among the lowest of any major country at about $3.20 per gallon for gasoline and $2.69 per gallon for diesel.

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National Development and Reform Commission (in Chinese):

http://www.ndrc.gov.cn

PetroChina Ltd.: http://www.petrochina.com.cn

Sinopec: http://www.sinopec.com