The main reason why Chinese oil imports were down in October is because oil prices were too high. At an average price of $73.39, refiners were paying about 6% more than they were in September. Now, $4.50 certainly doesn’t sound like much, but apparently it’s the straw that broke the camel’s back.

The Chinese government had been maintaining a fixed price system for fuel prices. As a result, refineries had to pay more for the oil they refined, but couldn’t increase the price of the products they produced. They were losing money, and fast.

Small refineries started to shut down, and China started to see fuel shortages.

That’s beginning to change, though.

On November 1, China raised gas and diesel prices by nearly 10%. This bump-up equates to about a 5-cent jump per liter for gasoline consumers and a 6-cent jump for diesel consumers.

This will help bring refineries back on line. Will it boost imports? Well, that depends on a couple of things.

Platts.com had this to say: “Despite the lower imports in October, Chinese oil companies paid $1.22 billion for oil products, down 7.3% from September, on the back of a bull run in international oil products prices brought on by record-breaking crude levels. This was 3% higher year on year even though in terms of volumes, products imports were slashed by almost 19%.”

That kind of price increase won’t make it easy for refiners to get back in the game, and now that some of these costs are being passed on to transportation companies and consumers, it raises the question of demand growth.

Here’s what I think: Chinese demand will continue to grow, though at a slightly slower pace. Fuel shortages didn’t stop people from waiting in long lines at fueling stations. A few cents more per liter won’t stop them from gassing up, either.

What it will do is cause Chinese oil companies to increase production.

According to Forbes online, “The central government has also urged PetroChina and the China Petroleum and Chemical Corp., commonly known as Sinopec, to increase their production and import more oil, regardless of cost.”

That means companies will be on the hunt for more fields, and partnering with global companies to develop them.

In TFN’s Chart of the Day, I’ll highlight which regions will get the most attention.

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