CHINA'S fuel shortages are worsening with the onset of winter, as output lags behind surging demand following price cuts that are raising refiners' losses.

The shortfalls are worst in east and central China, where some filling stations have run out of diesel fuel and authorities are warning against hoarding.

A surge in demand due to the end-of-year rush of construction projects and factory deliveries, the autumn harvest and transport of coal suppliers for winter heating has been worsened by hoarding following a recent cut in the government's wholesale price for fuel products, analysts and government reports said yesterday.

"Some companies expect supplies to be tight, and they are storing the oil to boost profits because they know demand will be stronger in this season," said Lin Boqiang, an energy professor at Xiamen University.

In a notice on its website yesterday, the Hunan provincial government called on local authorities to prevent illegal sales and hoarding of fuel to ensure "orderly supplies."

"Short supplies persist, and the number of filling stations that have suspended sales has increased," the notice said. The last three months of the year account for nearly a third of annual fuel demand, according to the Hunan government.

The persistent shortages reflect the limitations of China's system of centralized control of fuel prices. Because individual producers don't set their own prices, many often cut output to limit losses when domestic fuel prices are lower than what they must pay for imported oil.

In 2009, the government began changing domestic refined oil prices to reflect trends in international prices.

Source:shanghaidaily