China fuel crisis spreads

By Jim Bai and Rujun Shen

BEIJING/SHANGHAI (Reuters) - China's worst fuel crisis in two years spread to the capital and other inland areas by Wednesday, and one man was killed in a brawl at a petrol station queue, upping pressure on the government to intervene.

Diesel shortages in China's political heart, which escaped previous supply crunches unscathed, highlight tensions between the government and its increasingly independent oil firms about who should pay for the country's generous fuel subsidies.

Top refiner Sinopec on Wednesday pledged more supplies and bought additional diesel fuel abroad, but it may fall to Beijing to end the stand-off by raising domestic prices, easing taxes, promising another year-end pay-off -- or simply strong-arming suppliers into selling more fuel at a loss.

"Sinopec will work hard to resolve the diesel supply tightness," a headline in the company paper announced. Even so, at least five of its Beijing stations were rationing supplies.

At stake are profits for oil majors Sinopec and PetroChina from selling motor fuel in the world's second-largest consumer, where pump prices have not been raised in 17 months even as crude costs hit a series of record highs.

In scenes reminiscent of the weeks-long shortages in summer 2005, also caused by the yawning gap between domestic prices and global crude costs, petrol stations across the country were turning away trucks and rationing supplies.

After striking the southeastern coastal provinces and the financial hub of Shanghai, they are now hitting the interior, managers and local media say.

In Hefei, the capital of eastern Anhui province, independent suppliers had almost all run out of diesel and several controlled by the oil majors were rationing supplies, station workers said.

"We don't have diesel today. Supply has been quite spotty. Long lines in front of gas stations are very common these days in Hefei," a manager surnamed Yang told Reuters by telephone.

A man was killed in fuel-strapped Henan during a brawl over queue jumping at a service station, police said. Parts of Hunan and Hubei provinces also face shortages, media reports said.

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Beijing worries that more costly energy could push up already-high inflation or spark unrest, and effectively forces its refiners and retailers to subsidize state-set prices.

Diesel costs about 64 cents a liter at the pump in Beijing, versus around $1 in Singapore and $2 in Britain.

But a recent rally in global crude prices to above $90 a barrel has deepened large firms' losses and made them ever more reluctant to keep markets supplied.

A source at PetroChina said the company would lose 1,500 yuan ($200) a tonne by selling imported diesel at Chinese pumps.