More shortages?
There is a diesel shortage in China, as a result of price controls. Reuters:
Beijing worries that more costly energy could push up already-high inflation or spark unrest, and effectively forces its refiners and retailers to subsidize state-set prices. Diesel costs about 64 cents a liter at the pump in Beijing, versus around $1 in Singapore and $2 in Britain.
But a recent rally in global crude prices to above $90 a barrel has deepened large firms’ losses and made them ever more reluctant to keep markets supplied. A source at PetroChina said the company would lose 1,500 yuan ($200) a tonne by selling imported diesel at Chinese pumps.
“The crux of the problem is the state-owned enterprises…you see the remaining contradictions of the state sector in the market economy,” said Joseph Yu-shek Cheng, political science professor at the City University of Hong Kong.
As a result of the shortage, China is raising prices a measly 10%. WSJ:
China moved late Wednesday to raise the prices of gasoline, diesel oil and aviation kerosene by 500 yuan ($67) per ton, or roughly 10%, starting from Nov. 1, as regional shortages of fuel spread and even reached Beijing.
“The adjustment was made to shorten the gap between high-flying international crude prices and domestic oil prices,” China’s economic planner, the National Development and Reform Commission, said in announcing the move, according to the Xinhua News Agency.
China last raised fuel prices in May 2006. Since then, international oil prices have risen about 30%, breaching $90 a barrel and raising the specter of $100 oil…the price of gasoline will rise to 5,980 yuan from 5,480 yuan per ton, diesel will rise to 5,520 yuan per ton from 5,020 yuan per ton, and the retail price will be raised 0.40 yuan per liter per gasoline and 0.46 yuan per liter for diesel.
Price controls produce shortages of the goods they supposedly control the prices of. But who is responsible for the shortage of readability in the above articles? Can you figure out what the price of diesel currently is in China? That is a fact that would appear to be relevant in presenting these news stories to a largely American audience.
The WSJ says gasoline will be 0.40 yuan per liter. There are about 7.5 yuan to the dollar and 4.54 liters in a gallon. Isn’t that about 1.8 yuan to the gallon? And isn’t that about 25 cents a gallon? Didn’t the Reuters article say that diesel was 64 cents a liter or about $2.90 a gallon? These figures can’t both be right, can they? Have we forgotten how to do arithmetic, or have financial writers forgotten how to write financial articles — or are there shortages of both commodities?
November 1st, 2007 at 10:16 am
Have we forgotten how to do arithmetic… Heh. I can’t forget a skill I never managed to acquire.
But maybe I’ve forgotten how to use my browser’s text-search feature, because I can’t find
in the linked article. Or maybe the WSJ has changed the article.
…or have financial writers forgotten how to write financial articles…
The retail-diesel numbers look consistent if the above passage is clarified as “…the price of gasoline will rise to 5,980 yuan from 5,480 yuan per ton, diesel will rise to 5,520 yuan per ton from 5,020 yuan per ton, and the retail price will be raised by 0.40 yuan per liter for gasoline and by 0.46 yuan per liter for diesel.” However, a professional writer should not juxtapose prices per ton in the first two clauses with price changes per liter in the third clause.
(Jack, if you agree with the above, editing the post and suppressing this comment would be fine with me.)
November 1st, 2007 at 2:43 pm
I second gs comment. The 0.46 yuan raise in the price of diesel is consistent with about a 10% increase to $2.90/gallon. Units are all mixed up and therefore confusing, but I think the articles are consistent.
November 2nd, 2007 at 1:46 pm
The 4.54 litres per gallon is a conversion factor using the Imperial Gallon, not the American Gallon. I believe the American gallon is 3.81 litres .