Under growing pressures from public opinions and dogged criticism from newly appointed Finance Minister Vuong Dinh Hue, the petroleum market has witnessed initial progressive steps. According to the Notice No. 260/BTC-QLG issued by the Ministry of Finance, prices of diesel oil graded 0.05S and kerosene was reduced from VND20,800 and VND20,500 to VND20,400 and VND20,200 per litre, respectively. However, this reduction is much below expectations of consumers.
The Ministry of Finance said the price cut was resulted from lower global prices. However, according to experts, the move seemed not to meet expectations of citizens, the market and transportation companies which are affected most by any rise and fall of gasoline prices. This time, price cuts were applied to diesel oil and kerosene while prices of petrol grade A92 were kept unchanged at VND20,800 per litre. Nonetheless, according to Mr Thai Van Chung, General Secretary of the Ho Chi Minh City Freight Transportation Association, this price cut plus the reduction in August 26 enabled transport companies to lower fares by 5 percent. This is a good signal.
However, according to consumers, this decline is not satisfying because gasoline price remains VND20,800 per litre. According to experts, although gasoline prices have fallen significantly in Singapore, local wholesalers - all stated-run - cannot lower selling prices because of the Decree 84. Oil importers, which are also wholesalers and retailers, still report losses. Under the Decree 84, wholesalers’ prime cost for petrol is made up of the average price paid for petrol imported from Singapore within 30 days, taxes, marketing, distribution costs and a “rationed profit” of VND300 a litre. Hence, according to experts, prices of petroleum products can only be lowered when the Decree 84 is amended. The duration of time for calculating prime cost should be changed [shortened]. According to market data, prime price of petrol A92 was VND20,140 per litre on October 4, lower current retailing price by VND660. Plus the “rationed profit” of VND300 for each litre sold, oil importers are enjoying a profit of VND960 on each litre sold. The prime price is around VND20,000 a litre in the latest 10 days to October 4.
Given the current duration of 30 days, it is very hard to change selling prices because the fuel price is very volatile. For that reason, while global oil prices dropped for 10 days, local prices remained unchanged. In reality, a cycle of oil price is from seven to 10 days but Vietnam takes 30 days for calculating prime cost. As a result, oil traders have to wait enough 30 days to calculate new prices. Because of this regulation, consumers did not have the chance to buy cheap gasoline when global rates dropped sharply in June and August.
An excuse for the duration of 30 days chosen is oil importers have to stockpile petroleum products enough for 30 days of domestic consumption. However, according to experts, this rationale is no longer suitable because the supply is not entirely reliant on foreign sources as before. The country’s first Dung Quat refinery can meet 30 percent of the domestic demand. Mr Nguyen Hoai Giang, General Director of Binh Son Refining and Petrochemical Co., Ltd, said: Dung Quat refinery is running at 105 percent of its designed capacity. As of end-September 2011, the refiner had sold 3.71 million tonnes of petroleum products to the market. From now till the end of the year, it is expected to maintain the daily output of 19,000 tonnes which are sold to Petrolimex, PV Oil and Petec. Therefore, according to many experts, the Decree 84 needs amending for easier adjustment to petroleum prices.
Mr Ngo Tri Long, Director of the Price Research Institute, said: Price changes in gasoline cause a greater impact than diesel oil and kerosene given its overwhelming demand. A drop in gasoline price will help ease consumer price pressures especially when consume prices tend to increase in the last three months of the year. In addition, the Ministry of Finance needs to recalculate the profit margin for oil importers/traders.
Dr Nguyen Minh Phong, Director of the Hanoi Socioeconomic Development Research Institute, said: Current prices of petroleum products remain unknown and this is the biggest paradox of the Vietnamese economy. A change in petroleum prices will leave huge impact on macro economy, particular consumer price index, prices of services and essential goods. Vietnam is on way to become a market-oriented economy, and enhancing the publicity and transparency of petroleum product prices is a must and prices should move in concord with world movements, he concluded.
Anh Phuong
Vietnamese
