Increased Pressure for Consumers after a Gas Price Rise

According to forecast of the Ministry of Trade, prices of gas may increase in May due to a recent escalation in the price of oil, which is now at US$70 a barrel. All local gas trading companies say that world price of gas in May is expected to increase by between US$30 and US$40 per tonne, bringing the average price to US$470 per tonne. With the increase in world price and transportation fees, tax and profit, the increase in the local market will be between VND 7,000 and 9,000 per 12 kilogram cylinder. The present price in the Hanoi market fluctuates between VND 155,000 and VND 188,000 per cylinder.

 

Even though an official price has yet to be announced, most agents have given guidelines to their affiliates on an increase of around VND 10,000 per cylinder in gas prices in May. In some retail shops, prices have increased by between VND 7,000 and 12,000 per cylinder as owners say that the amount is an added cost for door-to-door delivery.

 

Tran Trung Chinh, general director of the Vietnam LPG Joint venture Company (VT Gas), said that in April, all gas trading companies in Vietnam were frightened due to incorrect market forecasts in January and February. As a result, due to inability to forecast the development of the market in the last two months, when gas price dropped by US$100 per tonne, companies stock in agents and warehouses was huge, reaching between 30 and 35 per cent, from February to April. At the same time, due to falling prices, speculation among retail shops and agents reduced, resulting in a decline in the demand. Due to this development, in late April, companies forecast that gas prices would continue to fall, so they reduced the import volume to sell their stock.

 

Now, before a price increase hits, the demand of agents has increased sharply, causing difficulties for companies. Even if they want to buy on the spot market in China at prices, higher by US$20 per tonne, they cannot find sources to make purchases. Also, according to Le Xuan Trinh, deputy director of the Gas Product Trading Company (PetroVietnam Gas), the transportation of gas from offshore to the coast has been suspended for between four and five days due to maintenance and repair activities, leading to a slight reduction in Dinh Co plant’s supply.

 

Trinh went on to say that world prices of gas did not observe any rule, because in previous years, gas prices were stable and dropped in summer. Trinh said that like gold, petrol, diesel oil and many other goods, gas had its prices impacted strongly from the crude oil market and with an escalation of oil price due to political factors, especially Iran’s nuclear issues, in the short term, gas prices will certainly be on the rise.