By DAVID DUBYNE
TRUCKS are lining up in their hundreds at three stations in Chengdu, China, in the hope of getting 40 litres of fuel each.
In this city of 10 million, only those three are still selling diesel.
This may be an economics-induced dress rehearsal of the reality that will face the rest of the world in the post-peak oil universe.
The story goes something like this: inflation is out of control at 6.5% and prices of everything have at least doubled in the last year and a half.
Wages remain almost stagnant with no upward rise to match the inflation rate.
Five years ago, when China’s economic boom started, dreams were alive in the air: a new car, a new apartment and a better life filled with possessions if you came to the cities and worked really hard.
That is exactly what happened, a flood of workers came to man the factories, build new skyscrapers, and fill offices by the hundreds of millions.
The carrot dangled in front of 1.3 billion people was simple: come, work and be rewarded.
That was then, this is now. The dream is dying on the vine.
A majority of Chinese citizens now realise that car ownership will not occur for them, the same goes for the apartment.
Property values are skyrocketing, up 400% in the past four years for today’s high-rises.
With unfulfilled dreams of car and home ownership, average workers trudge through their days knowing that the basic necessities and a night out on the town is all they will get in life.
Doubling food prices are making the country tighten spending and there is more grumbling from the average person on the street.
Recently a stampede at a supermarket offering a 25% discount on cooking oil left three injured and 31 dead.
This incident is also a result of bio-fuel production interfering with food production and driving up cooking oil prices. Inflation is not the only cause.
It has been a culmination of lost dreams: minimal income, rising food prices and no end in sight for the rising costs of daily life.
Last month’s 10% rise in fuel prices was unpopular and added another nail in the coffin.
Those who were able to afford cars within the last few years are now complaining about filling up the tank.
Fuel prices have more than doubled in the past two years.
China’s national government sets fuel prices, and with the Olympics approaching it does not want any civil disorder like that experienced in Myanmar after their fuel prices climbed.
The illusion of a harmonious society needs to be maintained throughout the Olympics in order to generate more foreign investment.
A further rise in fuel prices of about 20-30% will bring the refiners to the break-even point when selling refined fuel in China, but it will also cause transport drivers to strike and the gentle old lady on the street corner selling roasted chestnuts to become a fire breathing dragon asking for change.
Chinese citizens have put the equation together: higher fuel prices equals higher food prices. Based on the complaints I hear from my students about high prices, the central government would be asking for trouble with another fuel price increase.
This puts the central government in a “Catch 22” situation.
If it raises fuel prices, refiners will produce more since they are not losing money, but civil disorder may occur.
If they do nothing and the shortages continue for the next six months, the manufacture and export sector would continue to slow down, slowing the entire economy. That is until the Olympics are over!
Diesel shortages not only affects individual drivers with cars but also the transport and logistics industry, which supports the bread and butter of the Chinese economy, manufacturing and export.
Long lines at petrol stations are common across the country, and is not limited to the east coast, as some Western media have reported.
All cities and all provinces are experiencing lack of adequate diesel.
Obviously there are slowdowns in the delivery of imported materials from ports to factories and missed loading dates for containerised shipment.
There are now holes in delivery drivers’ pockets, since they are no longer able to earn a month’s wage.
Drivers paid by the trip are waiting as long as five or six hours to buy a maximum of 40 litres of fuel (at the current price) – but first they have to drive around the city until they find an open station with diesel to sell.
Truck drivers are basically working part-time now. They do not get paid to wait in line.
There is frequent talk about drivers changing occupations to earn a wage. They have to do something else for work to feed the family.
Contracts signed with a specified delivery date and with provision for late charge penalties are no longer valid. If your delivery is late by days or even a week, well that’s life. Cancelled orders and partial delivery to customers overseas is now standard.
A number of logistics company vehicles are grounded all along the coast from Shanghai to Shenzhen, waiting for their 40 litres of fuel as lines spill out onto highways, creating traffic jams on interstate highways.
Company vehicles are in a parking lot not moving at all.
I have been travelling around in the countryside and in cities, taking notice of petrol stations and changes in the society because of this situation.
What I have noticed is the number of stations that are simply closed. Trucks, wooden planks or plastic ropes block entrances to the pumps.
Buses now leave when full – a far cry from the earlier norm of regular hourly service that left on time even if you were the only passenger on board.
The countryside seems to have more diesel than the city areas. I saw no lines in rural areas, but the city is a different story. Lines of waiting trucks were longer last week than today in western China, a sign that the shortages have eased a bit, maybe.
Drivers seem to be taking it in good spirits. There is little violence in the lines as the army and police are at stations to keep order, but the economic trickle down is still to be felt.
Job shifts, less earned income per month, cancelled factory orders, late orders, missed loading dates, difficulties in transporting materials to and from ports, will mean some sort of ripple effect through the economy.
What I see occurring here is a dry run for worldwide energy shortages that may be just around the corner as decreasing production from older wells continues to outpace new discoveries of oil on our planet.
These diesel shortages in China will eventually ease if the proper amount of money is paid to the refiners in China – these shortages are based on economics.
Declining global oil production, on the other hand, will be permanent. Those shortages will be based on geology. There is a huge difference.
This shortage in China is diesel only but we should keep an eye on all other fuels.
The outcome should be mirrored in every other economy that experiences fuel shortages in the future. When energy shortages become permanent, these are the effects you can expect in the city near you. – onlineopinion

David DuByne teaches business English in Chongqing, China, while keeping an eye on energy, commodities and bio-fuel production in Asia. .