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China’s Latest Energy Crunch: Diesel Rationing

Chinese gas stations have started to limit diesel sales as supplies tighten for the oil product that has benefited the most from the record high coal and natural gas prices.

Diesel can be used in generators for power as China is struggling with electricity outages. But diesel is also the main fuel for long-haul heavy-duty trucks, and shortages in China could mean that another disruption is coming to global supply chains.

Gas stations in some parts of China have restricted the amount of diesel sold to customers to avoid widespread shortages, Bloomberg reports, noting that long lines at fuel retailers have formed in some regions in south-western and eastern China.  

“Diesel-powered vehicles can hardly get enough fuel as prices rise,” a truck dealer in the northern province of Hebei told Caixin Global.  

The diesel rationing at Chinese gas stations comes as the world’s second-largest economy is grappling with a power crisis amid shortages of coal and sky-high price of natural gas in Asia.

Power cuts and outages threaten the pace of the economic growth in China and the global supply chains, many of which originate in the country.

Many factories in Chinese export hub Yiwu in the Zhejiang province have reduced output because of the power outages, South China Morning Post reported on Wednesday.

Surging coal prices and power shortages in China slowed the growth of its economy in the third quarter and are now threatening to spill over to the global supply chains in the fourth quarter. The power cuts and the subdued property investment after the Evergrande debacle resulted in weaker-than-expected economic growth in China in the third quarter. Gross domestic product (GDP) rose by 4.9 percent in Q3 compared to the same quarter last year, below the 5.2-percent growth expected by analysts in a Reuters poll.

The slowdown in Chinese economic growth and the power cuts in factories risk roiling global supply chains even further. These supply chains have already been strained by a mass chip shortage and delays in shipments of various input materials.  

By Tsvetana Paraskova for Oilprice.com

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