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China's independents to sue oil majors over fuel

Frustrated by an unsteady trickle of overpriced fuel, China's independent oil firms hope to sue the country's two energy giants Sinopec and PetroChina under a new anti-monopoly law, Chinese media reported on Monday.

The companies have crushed their smaller rivals as they fought to protect their own bottom line from the impact of unprofitably low state-set fuel prices, the Beijing News reported.

Two-thirds of the country's 663 independent wholesalers have gone bankrupt and one third of its 45,064 independent service stations had also closed, the paper said, citing a survey by the China Fuel Distribution Association.

State-set retail prices were far below international levels for much of the year, and major refiners reluctant to process at a loss cut back on their output.

What fuel they did produce, they sent mostly to their own stations or sold at illegally high prices to their small competitors, Zhao Youshan, president of the China Fuel Distribution Association, told an industry conference.

The government in spring urged the two to open the taps to the private sector to enhance competition, but the firms appear to have ignored the government orders.

“Those official regulations just do not work, the two firms either did not supply us with any fuel at all, or gave us a higher-than-wholesale price, without receipts,” Zhao said.

The article also mentioned the woes of independent refiners, who have long struggled to source crude oil and often are forced to process fuel oil instead.

It was not clear if they too would be involved in the suit.

Legal experts said the suit had a sound basis in the new anti-monopoly law's reference to the “refusal to trade” and “setting trade barriers”, but the process is complicated and the independents may not be happy with the result.

But they added that regardless off the outcome, the independents may hope to benefit from the symbolic value of bringing Sinopec and PetroChina to court.

The long-awaited law went into force in August, and is Communist China's first comprehensive legal constraint on large companies abusing their market position. (Reuters)