Oil Price Controls in China
Mark Thoma tells us to read the excellent articles Keith Bradsher has been writing about the effects of energy price controls in China:
Fuel Shortages Put Pressure on Price Controls in China - New York Times: Sudden shortages of gasoline and diesel in Southeastern China are reigniting a debate here: Is pressure from state companies, coupled with freely available information on oil prices, driving China to accept market forces faster than it may have wanted?
Dozens of service stations in Southeastern China, notably in cities near Hong Kong, abruptly ran out of fuel this week just as officials in Beijing were debating requests from domestic oil companies to charge more for diesel and gasoline. The shortages have produced long lines of angry motorists... disrupted some freight shipments.... Sinopec, the state-controlled oil company that dominates the refining of fuel in China, especially in Southeastern China, said late Wednesday that the shortages were a result of people stockpiling fuel now that they have enough information to bet on the direction of oil prices.... People in China today have much greater access to information about world prices than ever before, and as they see high world oil prices, they are topping off fuel tanks in expectation that China will soon raise domestic prices, Mr. Jia said. "They buy inventory for their own tank in the hope the price will be changing," Mr. Jia said. "People think the trend in China should be toward a price increase."
While there are no good figures on the private storage capacity for fuel in China, oil experts say it is probably considerable as years of electricity shortages have prompted factories across the country to install backup diesel generators with large fuel tanks....
[T]he timing of the latest shortages, coinciding with an active debate in the government-controlled news media over whether China should liberalize retail energy prices, has made many energy analysts suspicious of these rationales. Sam Dale, an Asian oil analyst in Singapore with Energy Intelligence, a newsletter-publishing company based in New York, said oil companies appeared to be putting pressure on the Chinese government to free retail prices, by... holding back supplies from the market.... Sinopec's refineries are operating at 89 to 90 percent of capacity, compared with past rates as high as 97 to 98 percent, Mr. Jia said. There is a shortfall mainly because some refineries are closed for maintenance, but some refinery managers are also reluctant to produce at full tilt when retail prices are low, he added...
