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Oil Price Hike Leads to Closure of Many Private Gas Stations in China - Daily

Posted on: Friday, 26 August 2005, 09:00 CDT

Text of "Economic Review" by Chen Gang entitled: "Oil price hiking lands private petroleum firms in dilemma"; carried in English by official Chinese news agency Xinhua (New China News Agency)

Beijing, 26 August: Recent hike in international oil prices has led to the close-down of many privately-owned gas stations in China, the Beijing-based Economic Information Daily reported on Friday [26 August].

Some of them have been merged by China National Petroleum Corporation (CNPC), or China National Petrochemical Corporation (Sinopec), two giant state-owned oil companies in the country, it said.

"Obviously the hiking oil price is suffocating China's flimsy private oil enterprises," it said.

The Yuemeite Petrochemical Company, a relatively large private oil company based in Shenzhen, coastal city in south China's Guangdong Province, found it hard to continue business since last August due to supply suspension of the CNPC and Sinopec, two monopolized corporations in this area, its manager surnamed Lu told the newspaper.

So in wake of the international price rise, the two oil suppliers raised the wholesale price for refined oil accordingly, which exceeded the retailing price by at most 1,000 yuan (123 US dollars) per ton, Miss Lu said.

In China, retailing prices for refined oil, including gasoline and diesel oil, are decided by the government. Although China's retailing prices for refined oil have been raised several times since early this year, it still cannot catch up with the surging pace of international oil price.

The shrinking supply and soaring wholesale price have caused losses of local private gas stations. In recent days, many car drivers in Guangdong found it hard to buy No 90 gasoline and the supplies of No 93 gasoline has become tense.

Those gas stations affiliated to the CNPC and Sinopec, however, still continue their businesses as usually.

The profits gained by the two petroleum giants from crude production far exceeds their losses in refined oil retailing, since they sell crude oil at the same price as on the world market, insiders said.

China now has approximately 80,000 gas stations, half of which are privately-owned, according to the Economic Information Daily.

Deteriorating business in refined oil retailing this time has provided the CNPC and Sinopec with good opportunities for purchase of these private gas stations, in a bid to enhance their control of the market.

In order to vie with state-owned oil giants, in June this year, China's first private petroleum group, the Great United Petroleum Holding Co, Ltd (GUPC), announced its establishment in Beijing.

Initiated by a number of domestic private petroleum firms, the conglomerate declared to have nearly 50 private enterprises as shareholders with a combined capital of about 5bn yuan (some 600m US dollars) and announced to be China's largest private petroleum enterprise.

"It marks a breakthrough in China's oil industry long monopolized by the state-owned economy," said Bao Yujun, director of the All- China Society of the Private Economy at the ceremony.

The GUPC, however, has not received major licences so far for oil exploration, drilling, petrochemical production and refined oil wholesale, retailing and import, the Economic Information Daily said.

Source: BBC Monitoring Asia Pacific

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