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On September 22, 2020, China officially announced its goal of reaching peak carbon emissions by 2030, and striving to achieve carbon neutrality by 2060. Nearly a year after the setting of the dual-carbon goals, **policies once again focused on the dual control of energy consumption. On September 11, the National Development and Reform Commission issued a notice outlining a plan to improve the system for controlling both the intensity and total amount of energy consumption, assigning five-year targets for such control to various provinces. To further improve the dual control of energy consumption, and given the recent shortage in the supply of thermal coal, many regions have introduced additional control measures; phenomena such as power cuts and suspensions of production have drawn widespread attention in the market. The scale of power rationing in industry this time is the largest in recent years; with the exception of a few provinces in the northwest, most regions have implemented policies of cutting off electricity supply. The widespread power rationing across the country has also affected several major energy-producing provinces. It is understood that the provinces where restrictions are imposed on oil refining companies are mainly Shandong and Jiangsu. In the oil refining industry, Shandong Province is a hub for local refineries across the country. According to JLC Data, as of 2020, Shandong’s capacity for primary processing of crude oil was around 160 million tons per year, accounting for nearly 20% of the total refining capacity in the country. It has served as a barometer for the trends in the wholesale market for refined oil in recent years, and changes in the production activities of enterprises there have a significant impact on the national refined oil market. Starting from September 12, various cities in Shandong Province began to issue emergency warnings regarding power restrictions. Local refining enterprises in Zibo, Dongying, Weifang, Binzhou, and Heze were gradually included among the industries subject to such restrictions, and were required to follow plans for staggered and orderly electricity use. It is understood that the degree of power rationing varies from one city to another, with Zibo implementing the measures earliest and most strictly. On a provincial scale, power rationing is becoming increasingly strict. Last week, loading times at refineries were restricted one after another; later on, limits were set on the amount of electricity that companies could use. Various refineries reduced the electrical load on certain units, while a few refineries cut back on the operating time of their secondary units, resulting in a decline in the production of refined oil by local refineries. In fact, during the intensive inspections carried out by environmental protection teams in Shandong’s local refineries in early September, the production of gasoline and diesel, as well as the availability of those resources, declined. Once the inspections were over, the supply levels from these local refineries and related resources increased again. However, power rationing policies soon once again restricted the operation of local refineries. According to people from these refineries, such policies may have caused the production of refined oil by local refineries in Shandong Province to drop by 5-10% compared to the beginning of September. Furthermore, Jiangsu Province has faced a severe energy-saving situation this year; it is the province where power rationing measures have been implemented most strictly. The restrictions imposed on oil refining enterprises in this province are particularly evident. According to market information, local refineries have generally reduced the operating time of their secondary units, and even some of their atmospheric and vacuum distillation units. At the same time, some of the major refineries in the region were also slightly affected, with their operating capacity declining slightly. As for how long the power cuts will continue, there is no official confirmation yet. Judging from the indicators of progress toward the dual-control targets for energy consumption in various regions during the first half of 2021, Shandong Province is on a level 3 warning, indicating that progress has been generally smooth and that the need for power rationing is relatively low. Jiangsu Province is on a level-1 warning, indicating that the situation is extremely serious; to turn things around, it may be necessary to continue stepping up control measures. “The provinces under the first-level “dual-control” early warning category also include Guangdong, Guangxi, Fujian, Ningxia, and Qinghai. Furthermore, the power cuts this time are not only aimed at further achieving the goals related to energy consumption control. Since the beginning of this year, the supply and demand balance for coal has become increasingly tight, which has led to an even greater shortage of coal for power generation – and this is also one of the reasons for the widespread power cuts. Recently, the **National Development and Reform Commission has been closely monitoring the implementation of policies aimed at increasing coal production and supply in relevant provinces and enterprises, as well as the expansion and activation of advanced production capacity. The situation regarding coal supply is expected to improve, but with the upcoming heating season and the high level of industrial activity driven by the \"Golden September and Silver October\" trend, the gap in coal and electricity supply is likely to remain limited in the short term. At present, the policy of dual control over energy consumption is an inevitable trend. Jiangsu and Shandong rank among the top three provinces in terms of total electricity consumption in the country, and it is likely that power restrictions will continue in the fourth quarter, with possible adjustments to the severity of these restrictions. As far as is known, due to the strong pressure related to energy consumption control in Jiangsu Province, oil refining companies there may see another slight increase in power restrictions next month, and their operational rates will continue to be restricted. Jinlianchuang will also continue to monitor and report on any changes in power rationing policies in Shandong and other provinces. From the demand side, diesel demand remains on an upward trend amid the peak season of \"Golden September and Silver October.\" Since September, overall diesel inventory levels have declined significantly, with brief shortages occurring in certain areas. Based on past experience, power shortages and diesel shortages are closely related; many companies turn to using diesel for power generation when there are power restrictions. If power rationing policies continue in the fourth quarter, diesel demand may see some increase as a result, with this increase being determined by the extent of the power rationing. The diesel market has currently shown strong resilience against declines, and going forward, with expected reductions in supply and growth in demand, fundamental factors are likely to provide further support for prices. Source: Alliance Petrochemicals