China's boomtown bans low-grade gasoline

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SHENZHEN, China, Sept 27 (Reuters) Shenzhen, one of the richest cities in China's manufacturing hub of Guangdong, will phase out the country's cheapest 90-octane gasoline from Oct. 1 to boost air quality and as government price controls bite.

Demand from people driving their own cars, rather than taxis or company vehicles, is also drying up as drivers switch to more expensive 93-octane or 97-octane fuel to get the most from their investment, industry sources said.

''Shenzhen is a rich city. They have a lot of people with private cars, who don't use 90 (octane), so they decided to get rid of it,'' said a refining source who declined to be named.

''The market round here is shrinking.'' But state controls on fuel costs may also play a role, as they have forced refiners into the red, encouraging them to cut back production and focus on more expensive products.

Diesel and gasoline pump prices in China have not been raised since May last year, even though U.S. crude futures this month rose to new highs above a barrel.

In other areas of Guangdong province -- where no ban is planned -- supplies of the cheaper gasoline have also been running low, station managers and drivers said.

In Shenzhen, refiners will stop supplying 90-octane gasoline to the city's service stations from Oct. 1. When stocks run out the taxis and motorcycles which are the main users of the cheaper fuel will be forced to upgrade.

However no problems were anticipated in the wealthy hub, which borders Hong Kong.

''We haven't got any calls about it, people are used to the idea of it now,'' said an employee of the customer service centre at refiner Sinopec's Shenzhen office, who declined to be named.

Beijing has also phased out 90-octane gasoline as it struggles to clear the city air ahead of the 2008 Olympic Games, which it will host in August.

REUTERS MP HS1710

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