Shanghai yesterday increased the price of liquefied petroleum gas for motor-vehicle use to help ease a supply shortage caused by skyrocketing worldwide fuel costs - and to keep some people in business.

The benchmark LPG price for mopeds was raised to 4.7 yuan (68 US cents) per liter from 4.2 yuan, and that for taxis was lifted to 4.7 yuan from 3.6 yuan, according to the Shanghai Price Bureau.

The bureau stressed that retail LPG prices must not exceed these benchmarks.

The rises come as an increasing number of LPG filling stations in the city have temporarily closed or gone out of business.

Even with a government subsidy their businesses have been unprofitable after global oil and LPG prices soared.

City demand for the vehicle-use LPG is mainly met by imports. Prices of the auto gas have not been increased in Shanghai since last November.

Normally, Shanghai's 280,000-odd mopeds need 70 LPG stations to supply them. But since the number of stations has halved since the beginning of this year, long queues are the norm.

Shanghai promoted the use of the auto gas on a large scale at the start of the new millennium as the fuel creates less emissions compared with petrol and diesel.

At its peak, the city had more than 40,000 LPG taxis and 100-plus LPG stations.

However, the number of LPG taxis has declined sharply as drivers become frustrated by the lack of service stations and unsatisfactory engine performance.

Plus, LPG-fueled cars are no longer so economic.

LPG has higher equivalent fuel consumption against gasoline, and today's 4.7 yuan-per-liter LPG price is already very close to the 4.77 yuan benchmark of 90-octane gasoline in Shanghai.

There are less than 3,000 LPG cars on Shanghai's roads today and the price bureau has pledged subsidies to taxies affected by the latest price increase.

The city has barred the use of gasoline-powered mopeds since 2006, so moped drivers are the most affected by the recent LPG shortage as they have no other choice.

Shanghai has urged stations that can restart services to do so as soon as possible, government spokesman Chen Qiwei said, adding the city government will keep giving subsidies to ensure supply.

To keep giving subsidies will translate into a financial burden of more than 50 million yuan annually for the government. But if it doesn't, it means investments in LPG stations could be wasted as more would close if energy prices go higher.

It is a true Catch-22 situation.

"According to the experience of other nations, the most practical fuels in addition to gasoline and diesel so far are only natural gas and LPG," said Zhao Guotong, a city government adviser.

Experts said that the city should have a clear plan as to what's the answer to its future transport energy while speeding up studying other solutions like hydrogen fuel cells.

(Shanghai Daily June 16, 2008)