Why is Chinese energy giant PetroChina looking to Taiwan for help in easing the mainland's fuel crunch? Quindlen Krovatin in Beijing explains:

      When the Chinese government raised fuel prices on Wednesday, the message was clear: the country is facing an unprecedented energy crisis. The Chinese communist party has long been reluctant to relax state-controlled fuel prices because of concerns over worsening inflation, which hit an 11-year high in August due to soaring food prices. In fact, the 10% increase in prices of gasoline and diesel was China's first in 17 months, even though international crude prices rose 30% during the same period. Now after Wednesday's price hikes, drivers pay the equivalent of $3.20 a gallon for gasoline and $2.69 for diesel.

    The government appears to be caught between a rock and a hard place. On the one hand, affordable fuel is an important means to power China's red-hot economy and avoid grassroots dissatisfaction. At the same time, the government must bow to pressure from the country's massive refineries, which suspended production last month because state-controlled prices made it impossible to pass on the burden of record crude prices to consumers (although angry customers and some Chinese media have accused the refineries of creating a fake crisis, effectively blackmailing the government into raising prices).

     Previously, refineries had tried to offset their losses by selling gasoline to independent retailers who were then able to peddle fuel at prices in excess of state-mandated caps. However, authorities outlawed such sales in August. That prompted PetroChina, China's largest oil and gas producer by capacity and sales, to import gasoline for the first time ever in China's history.

      This was even more significant because the gasoline came from Taiwan. Even as cross-strait tensions rise, economic interdependence between the two regions grows, making the prospect of confrontation seem increasingly unlikely, saber-rattling aside. The Associated Press reported yesterday that further imports would be necessary to meet demand in China's south, where fuel scarcity first reached crisis proportions.

      Officials are hoping the price hikes will not trigger unrest, and the government is trying to nip potential protests in the bud by partially subsidizing gas purchases by taxi drivers and maintaining artificially low train ticket prices. China  is also turning to foreign sources of natural gas to meet demand; Beijing is eyeing Central Asian countries such as Turkmenistan, where PetroChina signed a 30-year agreement earlier this year to buy 17 billion cubic meters of natural gas a year and build the world's longest gas pipeline to carry the fuel. Still, China's energy crunch doesn't look like it will go away anytime soon. The government needs to tread carefully if it hopes to avoid throwing fuel onto the fire.