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Time MagazineThe next time you complain about the high price of gas, think of Mr. Ma. The owner of small logistics firm in Beijing, Ma was forced to shut it down temporarily earlier this week after he simply couldn't find enough diesel to fuel his company's 20 trucks. "Gas stations even serving diesel have been difficult to come across," says Ma, who didn't wish to give his first name. "I'm losing 100,000 renminbi $12,500 a day."
With crude oil closing in on $100 a barrel, the pinch of higher prices is being felt worldwide. In China, however, the impact of the hikes has been shortages at the pump, and tempers are running hot. Last weekend, a man was fatally stabbed in Shandong province after he jumped the queue at a local gas station. A second man in Henan province was killed in a similar incident Tuesday.
The crisis is largely one of China's own making. To reduce inflationary pressures on its red-hot economy, Beijing has not raised prices at the pump, which are set by the government, since May 2006. In that same period of time, international oil prices have risen about 30%, sticking refineries with spiraling costs for the crude they buy and shrinking profits for the gasoline they sell. Some smaller refineries stopped production altogether to avoid losses, while others begun hoarding their crude supplies, leading to gas shortages around the country.
In an effort to ease the pressure, China's economic planner, the National Development and Reform Commission, on Wednesday announced an almost 10% increase in domestic gasoline and diesel prices, calling the move an "urgent step" needed to tamp down demand and encourage refiners to ramp up production. The price hike is likely to alleviate the shortages — that is, until the next increase in global crude prices, says Gordon Kwan, a Hong Kong–based oil and gas analyst for CLSA Ltd. "When retail prices in China are nearly a third lower than in the rest of the world, why would producers want to boost supply?" Kwan asks. "The best way to solve the problem is to lift government regulation on prices."
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