With Low Fixed Gas Prices in China, Soaring Oil Costs Mean Long Lines at the Pump

By Katie Hayes
Truck drivers wait in line at a Sinopec gas station in Hangzhou, China for their daily diesel fill-up. They typically wait two hours each morning, due to the diesel shortage in China , which causes the the gas pumps close at 4pm.
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Song Xianjiang, a truck driver from Jiang Su Province, carries fruits and vegetables across China.

A long line of lumbering two-ton trucks were backed up for at least a mile along one of Hangzhou’s major highways by 11 a.m. the other day. As we crept by stopped trucks and gruff-looking drivers passing time on the roadside, our taxi driver said the holdup was at the fuel station. We soon learned that the state-owned Sinopec station would only be selling diesel until 4 p.m.

“We’ve been waiting here for two hours a day, everyday for the past month,” said Song Jiaxiang, a truck driver from Jiangsu province. “I don’t know why the government is limiting how much fuel we can buy, but this year has been difficult because of the earthquake and snowstorms.” Song said he earns 10,000 to 20,000 yuan, or about $1,430 to $2860, each month hauling fruit and vegetables across China.

According to a report from state-run China.org.cn, which cited a senior manager at Petrochina, the country is short on diesel because of increased demand, high domestic fuel prices and hoarding by some refineries. A recent Bloomberg report says record oil prices have forced Chinese refineries to cut production, as artificially low state-dictated fuel prices leave refineries selling their fuel well below cost. The cost of gas at the Sinopec station in Hangzhou was 5.12 yuan per liter, or $2.81 per gallon, which hasn't changed since the government raised it one-half yuan (7 cents) last fall.

Sitting in his office in a large shipping yard, waiting for drivers to return from deliveries, Hangzhou Transportation Co. owner Shao Xu, said the low cost of diesel is important to the bottom line for his three-truck outfit. “Artificially low fuel prices ensure a 50 to 60 percent profit margin for trucking companies,” said Zou, 29.

“Of course I’m nervous about the price of diesel going up. It will affect my business more than any other cost,” Shao said.

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