The real cause of the shortage of refined oil that is hitting many regions across China is still something of an enigma to the public, as State-owned oil magnates have flatly denied any responsibility.

Every time an oil shortage hits the country, which is now one of the world's leading oil consumers, State-owned and private oil suppliers always exchange accusations over who should carry the can.

Private oil suppliers blame the oil shortages on the overwhelming monopoly of the China Petrochemical Corporation (Sinopec) and the China National Petroleum Corporation (CNPC) and complain they have no diversified purchase channels.

In return, the State oil giants argue that they are under huge pressure from the rising cost of crude oil and suffer losses from oil refining, and the country's overall oil production capacity has declined because of the private oil suppliers's repair work.

At a recent financial forum Fu Chengyu, chairman of Sinopec, Asia's largest oil refiner, also blamed China's ongoing oil deficiency on excessive government controls on oil prices, which he said has resulted in the decline of the oil refining production.

"Sinopec has to give its shareholders a high return ratio and has to pay off bank interest rates and we cannot sustain that if we don't make enough profit," he said.

Such an argument contradicts the public's impression that domestic oil prices have risen more than they have declined during the drastic prices fluctuations of international crude oil.

According to a regulation issued by the National Development and Reform Commission in 2009, domestic oil prices will be adjusted when fluctuations of international crude oil prices exceed 4 percent within 22 consecutive work days.

Such a pricing system is aimed at bringing domestic oil prices in line with the changing international prices for crude oil.

However, the pricing mechanism only applies to the domestic retail market, while leaving wholesale prices to be determined by negotiations between refineries and buyers.

As the result, oil supply magnates, especially those monopolizing the chain of domestic oil production and wholesalers, stock supplies and await a rise in crude oil prices so as to gain a bigger profit.

As State-owned enterprises that hold the lion's share of the country's oil production and market, Sinopec and the CNPC are entrusted with the responsibility of maintaining national oil security and promoting a stable oil supply in addition to making money.

They should not be allowed to shirk this duty in pursuit of profit.

(China Daily 10/29/2011 page5)