China Gas Stations Ration Diesel Adding to Supply Chain Squeeze

(Bloomberg) -- Fuel retailers in parts of China are rationing diesel volumes to customers as the nation ramps up efforts to avert a similar supply crunch that’s engulfing the coal and natural gas sectors.

Long lines of vehicles are snaking from pump stations across Guangxi and Anhui province in east and southwest China, with truck drivers uploading videos to social media platforms to share their plight. In some areas, customers are being restricted to 1,000 yuan ($157) of diesel a day, down from 2,500 yuan, as filling stations rationed supplies to prevent shortfalls.

China has been grappling with shortages of coal and natural gas that’s led to power rationing and blackouts, crimping economic activity in some regions. Attention has now turned to diesel, which is one of the main beneficiaries of the energy crunch because it can be used to power smaller generators that can provide electricity to supplement the grid. 

Sales of generators surged in recent weeks after electricity rationing was put in place, according to sellers that spoke to Bloomberg. Orders have streamed in earlier than expected this year ahead of winter. China has also reduced diesel exports and increased imports to to try maintain adequate stockpiles.

Independent as well as state-owned oil refiners have repeatedly raised wholesale diesel and gasoline prices, citing skyrocketing costs for imported crude. That’s crimped margins for local retailers, and in some cases, led to fuel being sold below cost, creating yet another reason for filling stations to limit sales to customers. 

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