China´s subsidised Gasoline

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Cheap days over after the Olympics?

The Seattle Times on Tuesday described how the Chinese government had kept the retail price of gasoline at about $2.60 a gallon, up just 9 percent from January 2007. "China relies on imports for roughly half its oil use, which is growing at about 7 percent annually. Global oil topped $139 a barrel last week, double a year ago. But China raised pump prices only once in the past year, in November, by a little more than 9 percent."
Sounds like great news for motorists? Not necessarily.
"Motorists, [a SINOPEC researcher] says, might be feeling a supply crunch because Sinopec and PetroChina, which also operate most of the filling stations, might not be delivering as much fuel to nonaffiliated gas stations outside the quake zone. As a result, some gas stations have closed temporarily."

Indeed. There you stand, as a motorist, and can do nothing than leave your car on the roadside.

But wait. There are alternatives. Let´s learn from the pros.

Imagine you are a passenger on a mini-bus somewhere in China. You are familiar with the route, and you start wondering why the driver is leaving the familiar route every few hundred metres, exploring streets and neighbourhoods you have never seen before.
Chances are that he is looking for a privately-run gas station. And in the end, he may be lucky. For some extra money, after a long, time-wasting search, he gets his bus refuelled.

If this happens to you, your timetable has fallen victim to the global oil shortage. Or, if you look at it more critically, it has fallen victim to a Chinese dual-monopoly under government direction: China National Petroleum Corporation (CNPC, 中石油) and SINOPEC Group (China Petrochemical Corporation, 中石化).

An article on Tahai Net, on March 22, quotes an apparent insider. According to him, the chain stations don't sell all of their subsidised gasoline to the motorists, but keep some reserves which they then sell to the privately-run stations – 民营加油站 or minying jiayouzhan. The chain station and the privately-run station than "may earn a profit of, say, 0.5 Yuan each" in these shady deals.
Subsidised gasoline may not be that cheap after all. Besides, minying jiayouzhan are hardly showcases of safety and environmental compatibility.

The SINOPEC Group received 12,300,000,000 Yuan of subsidies from the state for the years of 2007 and 2008 – 4,900,000,000 for 2007; and 7,400,000,000 for 2008, according to 上海证券报 (Shanghai Securities News), quoted at

Let the Race beginAnd Jiang Jiemin (蒋洁敏), then President of listed PetroChina, told a Shanghai Securities News journalist in Hong Kong that PetroChina had asked the central government to adjust the gasoline prices in accordance with market-oriented reforms, and that it had also applied for a reduction of tariffs on imported gasoline.

In summer 2007, Chen Tonghai (陈同海), then SINOPEC chairman, resigned his job "for personal reasons".
His resignation was first interpreted as a slowdown in price restructuring, but then,
corruption charges became public in January this year.

Last month, Jiang Jiemin left his post as president of listed PetroChina. But he retained his posts as general manager of state-owned CNPC (PetroChina's parent company), and as chairman of PetroChina.
If the Seattle Times Report is right, the government may be willing to heed the demands for price-restructurings, once the Olympic Games are over.


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More external links about this topic
Government raises energy prices by as much as 18%, promises $2.9bn in subsidies
BBC News, Jun 20, 2008

Sinopec to halt oil products exports, raise output
China Daily, Jun 13, 2008

Diesel Running Short in Guangdong
China Radio International, Mar 25, 2008

"New rule will help ward off foreign companies´acquisition of private oil companies", Mar 06, 2008

China fuel price hike only slows refiners´ bleeding
NEAE News, Nov 02, 2007

Related internal links
The Trade surplus and its effects
Dec 14, 2007

The Burden of China´s Peasantry
Mar 08, 2007

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