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Consumers, retailers to benefit from market-based gas prices
The decision to allow oil product importers to set retail prices will allow them the flexibility needed to cope with “complicated market changes,” a senior official says.
Vuong Thai Dung, deputy general director of the country’s top oil product distributor Petrolimex, told Thanh Nien Daily that the government’s decision will also help create a more transparent business environment.
The Finance Ministry announced the new “market-oriented” mechanism on September 16 as the government moved to deregulate the fuel market and scrap oil subsidies.
The finance and trade ministries had far been in charge of adjusting retail oil product prices in Vietnam, Asia’s second largest importer of petroleum products after Indonesia.
The ministries have now established a committee to monitor oil product prices and approve importers’ proposals to adjust retail prices.
Under the mechanism, importers would have to register their planned price changes with the committee, and if it has no objection, the new prices would be automatically applied three days later.
Dung said consumers would benefit from the global oil price reductions while oil traders could still make profits to fund their development.
Petrolimex, which supplies over 60 percent of the country’s demand for oil products, would decide retail prices “quite independently” and “on the basis of respecting the government’s regulations and consumers,” he said.
Vuong Dinh Dung, director of the Military Petroleum Company (MIPECO), said “it is a good time” to apply the new mechanism as world oil prices are falling. It would create a fair playing field for local traders, he added.
He said traders had proposed that the government apply this mechanism for a long time.
The government had attempted to let importers price their products in April last year but had to suspend the plan as it wanted to control fuel prices to curb inflation as oil prices rose in the world market.
However, both Thai Dung and Dinh Dung did not expect petroleum traders to lower retail prices in the next few months even if crude oil fell further since they would still have to make up for previous losses.
Vietnam had slashed retail gasoline prices by 5.6 percent on August 27, the second cut this year in a span of two weeks.
The government would still fund importers to cover losses incurred before September 16, which amounted to more than $500 million in the first half, but would scrap oil product subsidies for new imports from Sept. 16, Deputy Minister of Finance Tran Xuan Ha said recently.
If world crude oil prices continue to decrease, Vietnam would consider increasing import tariffs on refined products to prevent smuggling through borders, the deputy minister said. The current tariff is 5 percent.
Vietnam relies almost entirely on oil product imports as it lacks refineries, but plans to be self-sufficient by 2015 when three key refineries are completed.
Its first refinery, the 140,000-bpd Dung Quat plant, is expected to come on stream in February next year, meeting about 40 percent of the country’s total demand for refined products.
Thanhnien
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