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Petroleum price increases not advisable
The pressure on petroleum prices has never been as hard as nowadays as the world’s oil price has nearly hit the $140/barrel. However, experts say Vietnam should not raise the petroleum price at this sensitive moment.
Many National Assembly’s deputies at the 3rd National Assembly session, which took place on May 6 – June 8, when the world’s price was at $125/barrel, expressed their doubts over the possibility of keeping petroleum prices in place until the end of June. The deputies estimated that if the world’s oil price increased by $100-110/barrel, the state would have to compensate VND12tril to subsidise petrol prices.
However, the estimates have become backward as the oil price has been very close to $140/barrel, or much higher than the levels the deputies could imagine. With the current petrol retail price of VND14,000/litre, importers are incurring the loss of VND4,000/litre for A92 petrol and VND6,000/litre for diesel, which means that the state has to spend no less than VND1tril a month to compensate for importers’ losses.
In fact, the Government has been urged to raise the petroleum retail price in order to ease the burden of petrol subsidization on the State budget. India, Malaysia, Indonesia and Taiwan have decided to cut down subsidization and raise domestic retail prices. The petrol price in Malaysia, for example, on June 5, soared dramatically from ringgit1.92 to ringgit2.7, or 40.62%. China also raised the retail price sharply by 18% on June 19 to $0.75/litre, the unexpected move, as people believed that the country would not raise the sale price until the Beijing Olympic ends in August.
However, experts say Vietnam should not follow the move as the petroleum price increases at this sensitive moment would kill all the efforts Vietnam has been making to fight inflation.
After the A92 price increased by 15.04% in November 2007, the consumer price index (CPI) increased by 2.91% in December, the 16-year record increase. Meanwhile, after the A92 price increased by 11.54% in February, CPI soared by 2.99% in March, the 19-year record high.
In fact, the current petroleum price in Vietnam has been staying at high level already after the two latest price increases.
China has made the 18% price increase, the sharpest price increase in the last eight months. However, its current sale price of $0.75/litre is still much lower than Vietnam’s price at $0.87%/litre (the exchange rate is the official exchange rate announced by the State Bank of Vietnam).
Malaysia, which has the average income per capita seven times higher than Vietnam’s and has decided the 40.62% price increase, still has the petrol retail price lower than Vietnam’s ($0.84/litre vs $0.87%/litre).
The figure shows that Vietnamese people still enjoy the low subsidization level from the State. While the inflation remains serious, it is still necessary to keep petroleum prices stable.
VNN
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