In 2007 China, the world’s most populous nation boasted a population of more than 1.3 billion1 people. In that year, its economy grew at a rate of 11.4%2, representing one the fastest growing economies in the world.
The energy requirements required to feed China’s rapidly growing economy have been exceptionally high. The purchase of these has been aided by the countries’ distorted market which has kept fuel costs artificially low.
Fuel shortages first hit China in 20053, whereby scarcity of fuel affected southern Chinese provinces, such as Guangzhou, as well as Zhejiang and Shanghai, in the country’s east. These shortages were attributed to transportation disruptions, along with government price controls.
In 2007, fuel shortages were widespread across China. These shortages were a result of price controls on fuel, regulated by the federal government in Beijing. As world oil prices were climbing, Chinese refiners were prohibited from increasing the costs to consumers accordingly. Consequently, Chinese oil companies were reticent to increase production, as this would only serve to exacerbate the companies’ losses.
State owned enterprises such as Sinopec needed to absorb significant financial losses, which Beijing sought to offset by providing annual payouts. Independent refiners, on the other hand, attempted to limit losses by trimming their processing rates and cutting flows to markets – subsequently tightening supplies of diesel and other fuel.
At this time, China had refused to increase fuel prices for almost 1.5 years, owing to fears that doing so would trigger civil unrest and push up inflation. China’s diesel prices, for example, were far lower than other nations’ with one litre costing just 64 cents in Beijing, compared to $1 in Singapore and $2 in Britain4.
In late 2007, some gas stations in China had closed, while others boasted long queues. Shortages had spread throughout the country, with fuel rationed or unavailable in Shanghai, along with central Chinese provinces of Anhui, Hunan and Hubei, as well as Beijing. Lack of fuel led to rationing at some filling stations, causing lengthy queues of potential customers to form. With customers forced to wait for hours for an unreliable fuel supply, tensions rose and tempers frayed.
In October 2007, one man was killed in a brawl that took place in a service station queue, in the central Chinese province of Henan. A customer having jumped the queue reportedly triggered this fight.
Fuel shortages, queuing, government, subsidies, unrest.
Fuel brawl in Henan province - PDF
1https://countryeconomy.com/demography/population/china?year=2007
2https://www.ft.com/content/a136b73e-d5a1-11dc-8b56-0000779fd2ac