Global Pressure Threatens Govt Efforts to Keep Oil Prices Unchanged

Global Pressure Threatens Govt Efforts to Keep Oil Prices Unchanged

Soaring oil prices in the global market and heavy losses suffered by local oil traders continue to bring pressures upon the government’s strive to keep oil retail prices from now to this year’s end, according to senior government officials.

Nine oil trading companies, all State-owned, are incurring heavy losses as the oil price in the world market has jumped to over US$60 per barrel.

According to an oil traders, they are now losing VND200 a liter on A92 gasoline, VND2,500 a liter on diesel oil and VND3,200 a liter on kerosene.

Petrolimex, the largest oil trading company in Vietnam with over 60 per cent of the market share, has suffered a daily loss of about VND3 billion in recent weeks, said Bui Ngoc Bao, Petrolimex deputy general director.

“If oil prices remain at above US$60 a barrel, the Government will have to disburse nearly VND20,000 billion (US$1.26 billion) to compensate losses made by oil traders” said Nguyen Khanh Long, head of the Market Price Institute under the Ministry of Finance.

Currently, the Government sets oil retail prices in Vietnam.

“Local oil retail prices should be increased to secure business operations of domestic oil traders, force residents to save fuel and reduce illegal exports to neighboring countries,” Bao said.

“Another rise in oil prices in the domestic market is inevitable under the current circumstance,” Phan The Rue, deputy minister of trade, said, adding that the rise should be calculated carefully.

In late March, the Government allowed oil traders to increase retail prices when the global price jumped to US$54 a barrel.

“It is time Vietnam got familiar with world-level oil prices,” he said, explaining that this move will help local enterprises to be more active in sharpening its competitive edge in the integration process and help local residents to get familiar with global price trends.

The oil price rise will also help address rampant illegal oil exports in neighboring countries, especially Cambodia where A92 gasoline is retailed at VND10,300 a liter, much lower than the VND8,000/liter level in Vietnam.

A border filling station in southern Kien Giang province sells about 300,000 liters of gasoline a month. A sales figure that hardly any filling station in Ho Chi Minh City, the largest city in Vietnam, can reach.

In response, yesterday a central committee hosted a conference on seeking measures to put a crack on illegal smuggles, including raising oil prices.

However, according to several economists, profits from crude oil export can compensate losses made by petroleum trading companies. In the first half of this year, Vietnam spent US$2.32 billion on refined oil imports but earned US$3.37 billion from crude oil exports.

Youth, Pioneer