Continued price hikes
At a seminar on helping ease energy firms' difficulties, recently held by the Industry and Trade Newspaper, Assoc. Prof. Dr. Ngo Tri Long said that over the past 40 years, political fluctuations have resulted in periodic global crises. But in the past two years, the price of petrol has fluctuated in an unprecedented manner, Long added.
|Nha Be petroleum depot|
For example, in April 2020, crude oil finished at -$36 a barrel, marking the only time it has gone below zero since oil futures began trading on NYMEX in 1983. This was partially attributed to the COVID-19 pandemic and social distancing that minimized oil demand. The price then increased to US$70-80/barrel when the pandemic was controlled. The petroleum price is expected to continue its uptrend due to growing economic recovery demand in the post-pandemic period, as well as the Russian-Ukrainian conflict that has been causing major energy shortages and tensions.
Bui Ngoc Bao, Chair of the Vietnam Petroleum Association (VINPA), attributed the current petroleum crisis to different factors. The petroleum price skyrocketed and then plunged, while the structure of petroleum products has changed, he said. Due to skyrocketing European demand for diesel as a gas substitute, diesel prices have skyrocketed to their highest level ever (almost US$200/barrel). For the first time, diesel prices in Vietnam exceeded petrol prices. In 2022, petroleum prices set records in terms of the number of price changes and increases. Specifically, within one day, the oil price could fluctuate US$10-12 USD per session, while in the past, such a cycle took 15-20 days or even one month, Bao said.
Inadequate and improper petroleum cost regulations are causing difficulties for petroleum businesses.
Setting a price ceiling
Although the cost of transporting gasoline to Vietnam was adjusted on November 11, petroleum businesses are suffering loss of US$5-6 per barrel, as the stipulated premium (part of petroleum cost for November and December contracts) is stipulated at only US$5-6 per barrel, while the actual cost is US$11 per barrel. If the premium subject to domestically produced gasoline is increased to a level applied to imported petroleum to ensure equality between gasoline traders, consumers will have to pay higher prices.
Responding to suggestions of VINPA's Bui Ngoc Bao, Assoc. Prof. Dr. Ngo Tri Long said there is room to control gasoline prices. Vietnam is applying four types of tax to petroleum products, and given the current difficulties, the state should share benefits with businesses and consumers to achieve common goals, Long said.
Assoc. Prof. Dr. Dinh Trong Thinh said that, it is necessary to review all petroleum import and sales plans of localities in the remaining months of 2022 and early 2023 to adjust petroleum import plans, meet demand and avoid supply shortages. Ministries and sectors need to have long-term plans, based on which to adjust cost regulations for specific periods to ease business difficulties.
According to VINPA's Bui Ngoc Bao, gasoline prices must be allowed to operate according to market mechanisms, with the state fixing a ceiling price and letting businesses adjust their prices accordingly. If world gasoline prices exceed the ceiling, tax and fee tools will be used.
There is no need to worry that petroleum companies will cheat because the prices have been publicized on all exchanges. What is more, Bao added, if enterprises are permitted to set their own prices, they will have to compete with each other to best serve consumers.
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