China stopped diesel exports in order to prevent domestic shortages

China will suspend diesel exports to ensure domestic supply as demand for the fuel rises due to the ongoing power shortages across the country.

China will suspend diesel exports in the near future, other than to Hong Kong and Macao, China's top economic planning body said in a notice on Friday.

The National Development and Reform Commission (NDRC) also called for increased production of oil byproducts and ordered dealers not to artificially raise the price of petro-chemicals through hoarding.

The notice came as the country enters its peak period for diesel use due to seasonal demand from the agriculture and fishing sectors.

Meanwhile, power shortages have pushed up diesel demand as factories use diesel powered generators to maintain production.

Many factories in Zhejiang Province, one of the country's major manufacturing bases, installed diesel powered generators after the power shortages in 2003, 2004 and 2005.

The power shortages are not only due to recent coal price hikes but also a lingering drought in China's south which has reduced the country's hydro-power resources.

Experts believe reforming the power pricing mechanism is the best way to tackle the power crisis.

Different from the power crises last decade, China has sufficient installed capacity, but a high percentage of generators are not operating, said Yu Yanshan, deputy head of the general administrative office of the State Electricity Regulatory Commission (SERC).

Power prices are largely fixed but coal prices fluctuate according to the market so power companies face profit losses if coal prices rise, Yu said.

Both private and state owned plants aim to make money and if they can not, they are reluctant to produce, he said.

Raising power prices will help alleviate the shortages, but if this can not be done because of inflation concerns, then more measures could be made to control coal prices, Yu said.

China Petrochemical Corp (Sinopec Group), the country's biggest oil refiner by capacity, said on April 19 that it had suspended exports of oil products to guarantee domestic supply.

The NDRC has urged domestic oil refiners to increase imports of chemical light oil, which is used to produce oil products.

China's oil products imports declined year on year 5.57 percent to 3.22 million tonnes in April, while the total imports in the first four months hit 14.25 million tonnes, up 18.3 percent year on year, according to the General Administration of Customs.

A total of 2.05 million tonnes of oil products were sold overseas in April, less than 2.57 million tonnes a year earlier and down about 20.5 percent over last month. The exports came to 8.63 million tonnes in the first four months in 2011, down 9.2 percent year on year.

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