As the domestic petroleum market is showing signs of growing volatility, the Ministry of Industry and Trade and the Ministry of Finance recently hosted a joint workshop on “Regulating market-oriented gasoline prices in Vietnam”.
According to the Governmental Decree 84/2009/ND-CP, the petroleum market is placed under the State management and traders are allowed to determine retailing prices. However, after nearly two years, this decree has not been brought into life, causing a lot of problems and difficulties in administration and operation of petroleum traders. Many delegates to the seminar outspokenly voiced against shortcomings in this decree.
Mr Bui Ngoc Bao, President and General Director of the Vietnam National Petroleum Corporation (Petrolimex) which keeps some 60 percent of Vietnamese petroleum market share, showed evidence about improper pricing mechanism. Accordingly, retail prices of petroleum products in Vietnam are lower than the rate provided by the Decree 84 and much lower than regional rates. Besides, while global oil prices are relatively volatile on global economic outlook, domestic prices are usually kept fixed for a relatively long time. As a result, many oil trading companies have suffered huge losses in a long time.
Recently, many petroleum wholesalers including Petrolimex, Saigon Petro and Petimex have sent requests for a new rise in petroleum prices. In response, the Ministry of Industry and Trade dispatched the Official Letter 12163/BTC-QLG, demanding petroleum companies not to raise selling prices.
Newly appointed Finance Minister Vuong Dinh Hue said Vietnam cannot regulate petroleum prices according to the market mechanism although wholesalers have sent requests for a hike and Vietnam is pursuing a market-based mechanism. He explained that the domestic petroleum market is now dominated by three big companies, namely Petrolimex, PV Oil and Saigon Petro, which occupy 90 percent of the market share.
So, without State management, the three companies may collude with each other. Then, the state of monopoly will likely happen and consumers will have a very few choices. He persistently emphasised that the petroleum market is regulated by the market mechanism under the administration of the State. However, the degree and roadmap [of the market mechanism] must be carefully weighed up by competent authorities to ensure macroeconomic stability, curb inflation and guarantee social security.
Disagreeing with the finance minister, Deputy Minister of Industry and Trade Nguyen Cam Tu said Vietnam lacks careful calculations in managing the petroleum market, stressing that the focus is only placed on selling prices. In the future, petroleum should be considered a commodity and its prices should be determined by companies rather than deep State interventions as now, Mr Tu said.
Mr Nguyen Tien Thoa, Director of Price Management Department under the Ministry of Finance, said the State intervention into this relatively price sensitive commodity is currently essential. He also admitted that the current fashion of gasoline price management will very easily lead to multiple difficulties for traders and facilitate illegal exportation. In addition, a much-expected instrument - Petroleum Price Stabilisation Fund - fails to meet expectations as a flexible gear for regulating externally volatile factors of this fuel.
There are always many different standpoints and explanations for the increase or decrease in this sensitive commodity price. The market is waiting for upcoming drastic measures from the Ministry of Finance and the Ministry of Industry and Trade to regulate fuel prices to cause little negative impact on inflation and harmonise benefits of consumers and oil trading companies.
Anh Phuong
Vietnamese
