Massive oil refining capacity idle in China amid soaring prices

As gasoline prices soar and the US considers invoking Cold War-era laws to boost production, there’s a massive pool of oil refining capacity on the other side of the Pacific Ocean that’s sitting idle.

Around a third of Chinese fuel-processing capacity is currently out of action as Asia’s largest economy struggles to put the coronavirus behind it. If tapped, the extra supply of diesel and gasoline could go a long way to cooling red-hot global fuel markets, but there’s little chance of that happening.

That’s because China’s refining sector is set up mainly to serve its mammoth domestic market. The government controls how much fuel can be sent abroad via a quota system that also applies to privately owned companies. And while Beijing has allowed more shipments at times over the years, it doesn’t want to become a major oil-product exporter as that would run counter to its goal of gradually de-carbonizing the economy.

“China’s absence in the export market is keenly felt in the broader regional, and even global market,” said Jane Xie, a senior oil analyst at data and analytics firm Kpler. There’s been a massive expansion in refining capacity in the country over the last three to five years, but that’s no longer translating into increased oil-product exports, she said.

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