Power shortage has pushed up demand for the fuel

China will suspend diesel exports to ensure domestic supply as demand for the fuel rises due to the ongoing power shortages across the country.

China will suspend diesel exports in the near future, other than to Hong Kong and Macao, China's top economic planning body said in a notice on Friday. The National Development and Reform Commission (NDRC) also called for increased production of oil by-products and ordered dealers not to artificially raise the price of petrochemicals through hoarding. The notice came as the country enters its peak period for diesel use due to seasonal demand from the agriculture and fishing sectors. Meanwhile, power shortages have pushed up diesel demand as factories use diesel powered generators to maintain production. Many factories in Zhejiang Province, one of the country's major manufacturing bases, installed diesel powered generators after the power shortages in 2003, 2004 and 2005.

Power shortages are not only due to recent coal price hikes but also a lingering drought in China's south which has reduced the country's hydro power resources.

Experts believe reforming the power pricing mechanism is the best way to tackle the power crisis.

Different from the power crises last decade, China has sufficient installed capacity, but a high percentage of generators are not operating, said Yu Yanshan, deputy head of the general administrative office of the State Electricity Regulatory Commission (SERC). Raising power prices will help alleviate the shortages, but if this can not be done because of inflation concerns, then more measures could be made to control coal prices, Mr. Yu said.

The NDRC has urged domestic oil refiners to increase imports of chemical light oil, which is used to produce oil products. China's oil products imports declined year-on-year 5.57 per cent to 3.22 million tonnes in April, while total imports in the first four months hit 14.25 million tonnes, up 18.3 per cent year-on-year, according to the General Administration of Customs.

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