Consumers trigger gas price war?

While the gas prices have been increasing sharply, some big gas suppliers unexpectedly reduce the retail prices. The move by the suppliers has been criticized as anti-competitive behaviour and believed to trigger a “gas price war”.

VietNamNet’s Vietnam Economic Forum interviewed Nguyen Si Thang, Chair of the Vietnam Gas Association about gas pricing and the “gas price war”.

The gas price soared in 2008, when the crude oil price climbed to the record level of $140 per barrel. Now the gas price keeps rising even when the crude oil price stays low. What are the reasons here?

It is true that in the economic crisis in July 2008, the crude oil price jumped to $140 per barrel, and the gas price in the world market soared to $927 per ton. At present, though the crude oil price stays at $80 per barrel, the gas price is still high at $925 per ton.

The domestic gas price is high because it reflects the world price. It is true that there is a close link between the crude oil and gas prices, but this does not mean that the gas price always goes up and down in accordance with the crude oil price.

On December 1, gas traders unanimously announced the 40,000 dong per tank increase, citing the world’s price increases. However, one week later, some gas traders in HCM City unexpectedly lowered the retail prices by 8000 dong per tank. Some “big guys” on the market have criticized that this as anti-competitive behaviour. Do you think that some traders try to collude with each other to control the prices in the market?

I do not think that enterprises fight with each other. However, I can say that the Decree 107 on gas trading management stipulates that enterprises are allowed to define sale prices themselves. The move of some gas traders in the south of easing the sale prices has been applauded by the gas association. The enterprises accept lower profit and respond to the Government’s call to stabilize the market. You should not claim that you have lost the market just because you sell products at higher prices than other enterprises.

The Vietnam Gas Association has sent a document to the Government and Ministry of Finance, asking to slash the import tariff from five to two percent in order to help stabilize the gas prices.

How will the import tariff reduction influence the market?

The gas price in the world market has been staying firmly at $1000 per ton. If the tariff is cut by 3 percent, the cost price will reduce by $20 per ton, which means that every tank of gas will be cheaper by several thousands dong. The modest 3 percent tax reduction proves to make no difference in comparison with $140 per ton. However, I believe that the slight reduction will partially help people overcome their difficulties.

A lot of gas companies complain that they cannot make profit at this moment. What would you say about that?

Some people think that the higher the gas prices are, the bigger profit gas companies earn. However, it is not true. The ratio of returns on turnover of many gas companies is now less than one percent.

Do you think that it is necessary to resume the ceiling and floor price scheme in order to better manage the gas prices in the market?

I think that the best tool for the market management is the supervision of consumers. In other words, if enterprises sell products at overly high prices, they will lose customers. – Vietnamnet

Tags: Vietnam gas, Vietnam Gas prices