Chinese oil majors Sinopec Corp (0386.HK: Quote, Profile, Research) and PetroChina (0857.HK: Quote, Profile, Research) have heeded Beijing's call to maximize output to end a months-long fuel shortage, analysts say. But even running full throttle, they won't be able to fully meet China's demand until two big new refineries come onstream in the second half of 2008.
In the short-term, only the army of small-scale independent refiners on China's eastern coast can fill the gap -- an unlikely prospect so long as Beijing keeps domestic prices low and global crude costs stay high, keeping their margins deep in the red.
And a decision this week to suspend a 17 percent tax on imported diesel fuel through March seemed the clearest sign yet that authorities are counting on the state-owned majors to maintain a steady flow of imports for months to come, as they enter the final lap of preparations for the Olympics.
"The big refinery projects in China will certainly miss the summer Olympics. And if refineries can't maximize runs, the import demand will be strong," said Victor Shum, a consultant at Purvin & Gertz, which advises refining firms on investments.
"There may be a scramble for diesel imports around the middle of next year."
Although refinery margins remain negative even after the 10 percent increase in regulated gasoline and diesel from November 1, most analysts believe the mainstream refiners have rallied to Chinese Premier Wen Jiabao's call that they meet their social imperative to fuel the world's fastest-growing major economy.