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China Fuel-Price Increase Shift Losses Fishermen Update2

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This topic contains 1 reply, has 1 voice, and was last updated by  Charles Randall 12 years, 10 months ago.

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  • #3471

    Charles Randall
    Participant

    China Fuel-Price Increases Shift Losses to Fishermen (Update2)

    By Winnie Zhu and Wang Ying
         Aug. 18, 2008 (Bloomberg) — Fisherman Cao Jianzhou may abandon
    the job his family has done for more than half a century because
    rising fuel costs mean he loses money every time he sets out to
    sea from his home northeast of Shanghai.
         “About 70 percent of the fishermen in our village lost
    money in the first half of this year,” said Cao, 44, who
    catches crab and shrimp with his eight-man crew off Chongming
    Island. “Some have quit and survive on the fee from selling
    their boats for scrap.”
         Cao is one of 750 million Chinese fishermen, farmers and
    their families who are being squeezed after the government in
    June joined India, Malaysia and Indonesia in raising state-
    controlled fuel prices to cut losses for refiners.
    The 17
    percent increase in gasoline prices and 18 percent jump in
    diesel fall disproportionately on rural China, where household
    incomes average 315 yuan ($46) a month.
         “This will add to the pressure on millions of Chinese
    fishermen and farmers suffering because they have to pay more
    for raw materials,” said Tommy Xiao, a research director at
    Shanghai JC Intelligence Co., which advises investors on
    commodities. “Farmers have no choice but to keep chugging
    along.”
         While the central government has eliminated taxes on grain
    and increased subsidies to keep farmers on the land, rising
    fertilizer and fuel costs have canceled out those incentives,
    farmers say
    .

                          Billions in Subsidies

         About 730 million Chinese earn a living from farming and
    more than 20 million depend on fishing, using diesel to fuel
    their tractors and trawlers. Average rural incomes are less than
    a third those in urban areas, government figures show.
         The state pledged 19.8 billion yuan in subsidies to ease
    the pain for fishermen, farmers and public transport operators
    after the latest fuel-price increase.
         Cao says that may not be enough to save him or the jobs of
    his crew, even though he lives in one of the largest houses in
    his village — a two-story, whitewashed building that he shares
    with his wife, parents and 18-year-old daughter.
         “The government has said there will be some subsidy, but
    nobody knows when we will get it or how much it will be,” Cao
    said in the kitchen, decorated with a picture of the local deity
    who is believed to protect fishermen and bring them prosperity.

                              Oil’s Advance

         Including payments from the state, he made a profit of
    about 100,000 yuan last year, down from about 200,000 yuan in
    previous years. That’s about the same as Cao estimates he could
    earn by scrapping his 6-year-old blue, wood-and-metal boat,
    moored just meters from his front door, along with dozens of
    others.
         China resisted increasing fuel prices for almost eight
    months, even as oil in New York advanced more than 40 percent,
    to shield the world’s most-populous nation from inflation and
    reduce the risk of civil unrest. Instead, it paid billions of
    dollars to subsidize money-losing refineries run by state-
    controlled oil companies China Petroleum & Chemical Corp. and
    PetroChina Co.
         Even so, fuel supplies dried up as some privately owned
    refiners cut production rather than sell goods at a loss
    ,
    prompting China to raise prices.
         Ma Bingshen, a farmer in Hebei province, south of Beijing,
    said the cost of harvesting a field of wheat had almost doubled
    before the latest fuel increase. Ma, 54, is paying twice as much
    for fertilizer as a year ago.

                          `Increased Pressure’

         “Even though the government scrapped the agricultural tax
    two years ago, rising farming costs have put increased pressure
    on our lives,” said Ma, whose family has worked 20 mu, an area
    equivalent to 3.3 acres, for at least three generations.
         The cost of harvesting each mu of wheat has increased to 60
    yuan from 35 yuan last year, Ma said. That’s reduced the income
    he uses to support his wife, 78-year-old mother, three daughters,
    a son, daughter-in-law and 1-year-old grandson.
         China increased gasoline prices to about 23.50 yuan a
    gallon, or $3.42, on June 20, encouraging refiners to produce
    fuel. That’s still 31 percent below the price of imported fuel,
    Goldman Sachs Group Inc. said at the time. Diesel rose to about
    24 yuan a gallon, or $3.49.
         While oil prices have dropped 16 percent since June 20,
    that hasn’t relieved pressure on consumers because fuel prices
    are set by the state, not the market. PetroChina, the nation’s
    second-largest refiner, last month said it doesn’t expect the
    government to raise prices before the Beijing Olympic Games end
    Aug. 24.

                                Soy Sauce

         A decision on adjusting fuel prices after the Games will
    depend on the market situation, Zhang Guobao, director of the
    National Energy Administration, said in Beijing today.
         “We all know that there’s likely to be another price hike
    in the coming months,” said Dou Pingsheng, 23, who uses his
    truck to deliver soy sauce to customers near Shanghai. “It’s
    always like this. When crude oil goes higher, supply becomes
    tight and then the government is forced to increase prices.”
         Cao, the fisherman, has abandoned plans for his daughter to
    follow him in trawling the waters off Shanghai, and is
    considering his options if he sells his boat.
         “I haven’t figured out what to do after that,” said Cao,
    who like most of the island’s fishermen, is the only earner for
    his family. “But I cannot remain in a business that makes me
    lose money.”

  • #6648

    Charles Randall
    Participant

    Here is good Bloomberg article on update of China Fuel-Price increase & impacts on farmers/fishermen & families.
     
    Keep in mind that the increase is from a government controlled price under US$0.87/gal and that the Chinese Government will still have to bail out the Government controlled refining industry (Sinopec & Petrochina) for the 5th year in row at $Billon losses. The independent refineries have shut down except niche areas using domestic crude or black market Iraq crude.
     
    I think major crack is developing in the China growth & subsidy machine used to shift jobs/industry & products from Western world to China isn’t going to be able to continue at +$100/Bbl levels IEA/Pickens & rest of the “High Crude Price” forecast folks are trying to project. (Also just wait till all speculators that didnt get caught or bankrupt with price shift start playing the market on the short/downside position.)
     
    So even if US & Western world governments continue sit on their collective butts and let China subsidize this unfair trade advantage (via logistics/fuel cost raw materials and products to market) – the market forces will drive them out. If US consumer demand is buckling under weight of $USD 80-124/Bbl crude selling products at $US3.75/gal. then China export demand stands no chance of continuing support at these sub USD$1.0/gal. prices and the current China high unemployment and inflation values are going to really shut down their economy. And that is in addition to & before they get the backwash from US demand shut down impacting their export shipments.
    Regards

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