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Oil Giants Monopoly Blamed in Diesel Shortage

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China's privately owned oil refineries have accused oil giants in the country of holding back supplies and fueling the diesel shortage that has plagued the country since late September.

The real reason behind the diesel shortage, however, was the monopoly of the oil market by a few state-owned oil giants that led to insufficient supplies when demand rose, said Zhang Yue, chairman of the petroleum unit with the All-China Federation of Industry and Commerce (ACFIC).

ACFIC is composed of private industrialists and businessmen and has been advocating for support to the country's private sector. Zhang said at a press briefing here Friday that China's petroleum consumption in the first 10 months of the year rose about 10 percent year on year, but the export of refined oil products jumped 19.8 percent to 22.9 million tons during the same period. He did not clarify the sources of the data.

Also, private refineries, despite an indispensable part of the country's oil industry, lack competitiveness in the market because the country's oil giants are controlling their crude oil supply, said Zhang.

According to Zhang, the country's 60-plus private refineries have an annual refining capacity of over 80 million tons, accounting for one quarter of the country's total.

However, it is hard for these private refineries to obtain enough crude oil from Sinopec and PetroChina, the country's top two oil refiners that are authorized by the government to import crude oil and reallocate to private refineries.

Zhang said private refineries could obtain crude oil from the two giants at no more than 10 percent of their capacity.

Further, at the time when demand for diesel rises, these private refineries are unable to expand production due to lack of crude oil.

Thus, they have to purchase residual fuel oil from overseas markets to produce diesel at a higher cost.

Zhang has since called on the government to moderately open the crude oil import market to private refineries so as to increase oil supplies and to stabilize the market.

Zhang's opinion was echoed by Wang Weihan, a researcher with the Energy Economic Center at Beijing-based University of International Business and Economics (UIBE).

Wang said the causes of fuel shortages, also seen in other years, were essentially rooted in the monopoly status of the oil market.

"Without involvement and full competition from private oil enterprises, there will never be a mature and healthy oil market and industry. And the fuel shortage will re-emerge year after year," said Wang.

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