The central government is being pressed to solve the problem not by lowering the price, but raising it - a demand being led by the mainland's oil companies.

The row is a test case for a government caught between the need to keep its hell-for-leather growth going and to deal with unsustainable, underlying economic flaws.

For everyone agrees Beijing will have to stop controlling the price of oil as it does now, for economic and environmental reasons. But they also fear the effect on energy-reliant industry.

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The crisis began last month in Guangdong province, home to many of China's vast new factories. Within a few days of reports of gasoline shortages, queues almost a kilometer long had formed. Sinopec and PetroChina publicly blamed the typhoon season. But their complaints to the government about its pricing policy were soon leaked.

As world oil prices rose to US$60 (HK$468) a barrel and beyond, Beijing's pricing mechanism allowed the companies to pass less than half the rise to consumers.

At one point, domestic prices were US$20 behind the international price.

These oil firms are state-controlled. But under reforms, they are supposed to behave like real companies. They complain the price restrictions mean that the more gasoline they deliver to the pumps, the more money they lose.

In the past, when China was self- reliant for its oil supplies, state controls were feasible. But the growth of the economy means that, according to official figures, 40 percent - half by outside estimates - of the mainland's oil is now imported.

The irony for the government is that it is at present reforming state companies, demanding that nearly all prepare their shares for flotation on the stock exchanges. Analysts point out that investors' fears of government intervention are one of the major impediments to the success of this project.

Alan Chan, an oil analyst for investment bank KGI in Hong Kong, said: "Most other countries' petrochemical firms are making big profits. In China they are seeing negative growth."

With company profitability tight, a rise in fuel prices could be a blow too far. Zhang Guobao, deputy director of the National Development and Reform Commission, said a price rise could trigger inflation which would "affect the livelihoods of millions along with government expenditures."

Chan said a price rise is probable over the next year or two, but added: "I don't think [the oil companies] can put any pressure on - they are basically state-owned companies." THE DAILY TELEGRAPH