A Halt to Oil Price Hike

On March 22, 2010, the Ministry of Finance told oil traders to cease a hike in gasoline retail prices in the country, and continue tracking global markets to calculate price adjustments.

The written document sent to oil traders, all State-owned, clearly reads if global gasoline prices continue to increase and the price hike delay affects their business and production activities, petroleum wholesalers can send proposals for a price change to the Ministry of Finance and the Ministry of Industry and Trade for approval.

In case global fuel price unbearably increases, the State will apply immediate measures such as tax reduction to interview the market with oil price stabilisation fund.

The Ministry of Finance also told petroleum traders to timely revise down petroleum prices in case the global rates slumped.

Mr Nguyen Tien Thoa, Director of the Price Management Department under the Ministry of Finance, said petroleum traders are not allowed to hike the price in March.

According to Mr Thoa’s analysis, tax policies issued by the Ministry of Finance include three types: special consumption tax, import tariff and VAT. Presently, import tax on petrol and kerosene are 20 % and diesel oil and fuel oil are subjected to 15 %. All four types of distillated fuel are imposed 10 % of VAT. The special consumption tax is applied to only petrol, at 10 %. In case of necessity, the Ministry of Finance may regulate the tax to support oil traders.

Although the petroleum price stabilisation fund remains unused, Mr Thoa, however, reasserted that the source will be used as a lifebuoy for businesses when necessary.

At the request of the Government and under the public pressure, petroleum traders have officially publicised their pricing structure. According to the latest Petrolimex announcement, the base price for a litre of petrol is VND17,989; diesel oil, VND15,389; and kerosene, VND15,780. Thus, compared with the current selling prices, the largest oil trader in the country is suffering a loss of VND999 on a litre of gasoline sold, VND489 on a litre of diesel oil and VND480 on a litre of kerosene.

Petrolimex also propose the price of petrol products in the world are rising, the specific price offer in the market in Singapore is nearly 90USD/thung for gasoline, diesel oil. With this price, plus the taxes, shipping charges, and a number of other charges, the Petrolimex will get more difficult to profit rather than being “great interest” as some sources give.

Petrolimex also informed that prices of refined oil are growing up globally. Specifically, bid price in the Singapore market is nearly US$90 per barrel. After adding taxes and fees, Petrolimex is hardly making profit.

Since the enactment of the Decree 84/2009/ND-CP on petroleum business, petroleum traders were entitled to adjust the gasoline price, aiming to create a market-oriented oil trading. Since October 2009 since the ruling took effect, Petrolimex has adjusted the price five times, including four ups and one down.

Before public pressure that Decree 84 was invisibly lending a helping hand to petroleum companies to create monopoly. The government information portal has held an online exchange on this issue. The Vietnam Business Forum excerpted ideas of industry experts.

Little impact of prices on CPI, Ms Nguyen Thanh Huong, Deputy Director of Pricing Management Department, Ministry of Finance

Undoubtedly, petrol prices have direct and indirect impacts on the national economy. However, the price change caused little impacts on CPI, estimated at 0.01 %. Personal consumers add VND10,000 – 15,000 per month and I think the amount is acceptable by consumers.

As of early March, the petroleum price stabilisation fund has raised some VND1,500 billion. The Decree 84 stipulates that if the rise is less than 7 %, petroleum traders do not need to ask for permit but report latter; if the increase is from 7 % to 12 %, they are entitled to increase 7 % and 60 % of the 7-12 % and the fund will compensate the rest of 40 % under the guidance of the Ministry of Finance. If the world price jumps above 12 %, the State will decide on the gasoline price.

Petrolimex is accused as the public confused, Bui Ngoc Bao, General Director of the Vietnam National Petroleum Corporation (Petrolimex)

The price of petroleum products is adjusted in the spirit of the Decree 84. The causes for the price hike are either global price gains or two exchange rate adjustments (November 26 and December 11). According to the public opinion, the recent gasoline prices are higher than the global rates because they are confused of CIF and FOB prices. Moreover, the base price is calculated in the spirit of the Decree 84 and input factors provided by the State. If the calculation is based on the Decree 84, all can find out the final answer. This is the price calculated on the basis of the Decree 84, not the cost price of enterprises

Petrolimex started publicising gasoline retail prices on its website. This is the practical action for consumers as well as State management organs as Petrolimex is the largest trader amongst 11 petroleum wholesalers.

The market share of Petrolimex is not even from region to region. In highly competitive areas such as Hanoi or Ho Chi Minh City, its market share is just 40 %. But, in far-lying areas such as Son La, Lai Chau and the Central Highlands, Petrolimex holds almost 100 % of market share. In these places, Petrolimex primarily fulfil political tasks as revenues are insufficient to cover costs.

VCCI

Tags: Vietnam oil and gas, Vietnam oil prices