China Fights Fuel Crunch

Power curbs lead to diesel shortages as businesses rely on generators to avoid shutdowns.
By Michael Lelyveld
china-diesel-305.jpg Truck drivers queue for hours to fill their vehicles with diesel in Hefei, east China's Anhui province, Oct. 22, 2010.

China's citizens have been struggling for weeks with fuel shortages as a consequence of the government's energy efficiency campaign.

Motor carriers, farms, and even funeral parlors have all been affected by the scarcity of diesel since late October, according to state media.

Thousands of stations have run out of the fuel in cities across the country, setting off a scramble for available supplies.

The search has led to lines of stalled trucks, late deliveries, and traffic jams in a squeeze that the official Xinhua news agency called "unprecedented."

On Nov. 15, the crisis appeared to reach new heights as a funeral home in the southwestern municipality of Chongqing halted cremations after failing to find fuel, the official English-language China Daily said.

The shortage has created a "public panic," the paper's website reported, citing a 26-percent drop in inventories.
While the effect may be overstated, the inconvenience has been widespread.

Push is blamed

The government's last-minute push to meet five-year energy efficiency targets is getting the blame as businesses try to keep running despite power cuts by switching to diesel generators.

China has pledged to save 20 percent of the energy used per unit of GDP by the end of this year, leading some local governments to limit power for factories and homes.

"When they shut down all this electricity supply, it's going to ripple through the system, people are going to react, and you're going to get this spike in diesel use," said Mikkal Herberg, research director for energy security at the Seattle-based National Bureau of Asian Research.

But Philip Andrews-Speed, an energy expert in Edinburgh, Scotland, said there is nothing unprecedented about fuel- switching and the resulting shortages in China.

The same thing happened in 2003-04, when power demand raced ahead of generating capacity, forcing businesses to buy generators. Diesel fuel quickly became scarce then, as well.

"If it's not coming through the grid, you take the next- best alternative, which in China and most places is to unwrap your existing diesel generator or go buy a new one," said Andrews-Speed.

Problems persist

The government should have known that the latest power crunch would produce fuel problems because of the earlier experience, he said.

On Nov. 9, China's top oil refiner Sinopec said it was boosting production and importing more diesel, but problems have persisted as the shortage syndrome of hoarding takes hold and feeds on itself.

On Nov. 11, Reuters reported that the government might tap state reserves. Scheduled refinery maintenance might also be postponed to produce more fuel, industry officials said.

But China's Economic Information Daily said the shortage could continue for the rest of the year because the government shows no signs of backing away from its energy efficiency campaign.

Through 2009, China officially achieved a 15.6-percent decrease in "energy intensity," leaving it short of its 20- percent goal under the 11th Five-Year Plan.

Goal in doubt

While the government may meet its target according to official figures, the claim is bound to be questioned because diesel generators are far less efficient than power plants.

But analysts doubt the statistics will capture all the effects of the switch to diesel power.

"It wouldn't be surprising if China were using more energy and actually not meeting that energy intensity goal," Herberg said.

The economic effects of curbing power supplies are also controversial.

"It brings financial losses to the enterprises involved because everything gets delayed," said Andrews-Speed. "They may or may not do something to improve their energy intensity figures, but certainly the smooth running of the economy has been hugely disrupted."

Social implications

Cutting power supplies under the rigid application of the five-year target also has social implications.

"That's going to make local governments extremely unpopular," Andrews-Speed said, noting that imposed shutdowns and brownouts go against Beijing's stated goal of a "harmonious society."

But the central government has also taken the target as a test of its ability to fight climate change with a 40-45 cut in greenhouse gas emissions from 2005 levels by 2020.

"The leadership has really put themselves on the line to meet this goal, and therefore they're willing to live with these other shortages," Herberg said.

So far, power consumption appears to be racing ahead of GDP growth, raising doubts that the energy efficiency target will be met.

In the first three quarters of the year, China's economy rose 10.6 percent from the year-earlier period, according to the National Bureau of Statistics. In the first 1O months, electricity use jumped 17 percent, the China Electricity Council said.

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