China raised gasoline and diesel prices by almost 10 percent on Thursday amid fuel shortages that oil companies blame on a lack of refining capacity due to price controls.
The change was made to narrow the gap between soaring crude prices and state-set retail prices, the country's main planning agency, the National Development and Reform Commission, said in a statement.
"To ensure the supply of domestic oil products and the promotion of energy conservation, the state decided to properly increase the prices of oil products," the NDRC said. It said the price rise also would apply to aviation fuel.
Shortages of diesel and gasoline have led to rationing over the past week, causing long lines at filling stations and disrupting trucking in key export areas. Some customers and Chinese media accused oil companies of creating phony shortages to force Beijing to raise prices.
On Wednesday, a man was killed in a fight after he tried to cut in line for gas in the central province of Henan, according to police.
The announcement Thursday marked a reversal of a government order in September that froze prices of gasoline and other basic consumer goods in an effort to rein in rising inflation.
Chinese oil refiners are losing money due to low government-set retail prices for gasoline and diesel that prevent them from passing on soaring crude costs to consumers.
Some refineries have stopped processing to avoid losses.
Crude prices have jumped sharply, touching above US$95 a barrel in early trading on Thursday.
The NDRC said it would try to shield the public from some of the increases.
"Prices of railway tickets, natural gas for civilian use and public transportation will not be raised to reduce the impact of the price hikes on the public, and the government will provide subsidies for taxi drivers," it said.
China's No. 2 oil company, China Petroleum & Chemical Corp., known as Sinopec, defended its supply efforts Wednesday, saying in a statement that producers were "painstakingly organizing resources to get them to market" and also importing fuel.
Sinopec said it would import more oil this month to "stabilize the domestic market" but gave no information on when the crunch might ease.
Trucking companies say the rationing, which has limited customers to as little as a quarter-tank, has raised costs and delayed deliveries. The impact on China's trade-dependent economy is unclear.
"Prices of railway cargo transportation, aviation passenger services and highway need to be adjusted properly," the NDRC said.
China has risen in recent years to become the world's second-biggest oil consumer after the United States, propelled by economic growth that is expected to top 10 percent this year for a fifth straight year.
Government oil companies have spent billions of dollars to secure access to foreign oil and gas, leading to criticism of their willingness to deal with such isolated governments as Iran and Sudan.
Sinopec acknowledged that refiners that have suspended operations due to rising costs were partly to blame for the shortages. But it said they also were caused by mounting demand.
The communist government has forced oil companies to shield the rest of the economy from rising world oil prices.
Authorities have rejected appeals from oil companies to raise retail prices, saying they want to avoid hurting China's poor, who have endured sharp rises in food costs this year.
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National Development and Reform Commission (in Chinese): http://www.ndrc.gov.cn
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