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Is petrol price in Vietnam high or low?
One year ago, when the world’s oil price peaked at $147 per barrel, the domestic petrol price was 19,000 dong per litre. Nowadays, the world’s oil price has fallen by 50 percent to around $70 per barrel, but the domestic petrol price is 13,500 dong per litre.
Importers claim losses
Since the beginning of April, the domestic petrol price has increased four times by 2,500 dong per litre in total, or 22 percent. At the same time, the petrol import tax has been slashed from 40 percent to 20 percent currently. The Ministry of Finance has been trying to help ease the burden on petrol importers by allowing importers not to make contributions to the petrol stabilisation fund and not to pay debts to the state budget now.
However, petroleum importers still complain they are incurring losses.
Vuong Thai Dung, Deputy General Director of Petrolimex, which holds 60 percent of the market share, said that though the petrol price has been raised by 1,000 dong per litre since June 10, his company is still incurring heavy losses of 1,800-1,900 dong per litre of petrol sold, 1,500 dong per litre of diesel and 1,000 dong per litre of FO.
The same is said by other petroleum importers. Representative from Military Petroleum Company said that it is incurring the loss of 1,000 dong per litre of petrol, while Dong Thap Petroleum Company has reported the loss of 1,500 dong per litre of petrol.
“In fact, the previous petrol price increases just helped enterprises break even for several days. After that several days, the world’s oil price moved up again and the companies began losing money again,” said a representative from Petec.
Petrol distributors all say that the domestic petrol price was curbed at a low level for a long period. Therefore, the modest price increase of 1,000 dong per litre each time has done nothing to offset their losses.
They believe that the petrol price should be 15,500 dong per litre, which they say would allow them to break even.
Domestic price under pressure
If following the formula that the world’s oil price has dropped by 50 percent from the peak and the domestic price ought to drop by 50 percent as well, the domestic petrol price should be some 9,000 dong per litre only, or 4,500 dong per litre lower than the current price level.
Vuong Thai Dung of Petrolimex acknowledged that the domestic petrol price has not decreased in accordance with the world’s oil price decrease.
Dung has attributed this to the changed petrol pricing scheme. He said that at the time when the petrol price reached its peak, the State subsidised the petrol price, while the mechanism has stopped and now in Vietnam, the petrol pricing is following the market rules.
Petrol importers now have to pay higher taxes and fees than they did at the time of the world’s peak price. In July 2008, when the world’s crude oil price climbed to $147 per barrel, the import tax was 0 percent, while the petrol fee was just 500 dong per litre.
Dung said that the 19,000 dong per litre of petrol at that time was just a ‘virtual’ price, which did not reflect the actual production cost. The retail petrol price should have been 24-25,000 dong per litre at that moment. At that time, the 19,000 dong per litre was set because the state compensated importers for losses and accepted losses from petrol import taxes.
Meanwhile, Dung said, 30 percent of the production cost of every litre of petrol is being paid to the state budget, including the 20 percent import tax and the petrol fee which has been doubled to 1,000 dong per litre. Meanwhile, the VND/US$ exchange rate has increased by 200-300 dong per dollar.
In December 2008, when the crude oil price fell to the record low at $42 per barrel, down by 3.5 times from the peak price, the domestic petrol price decreased by 42 percent only to 11,000 dong per litre from the highest peak level of 19,000 dong per litre.
The modest petrol price decrease has been explained by the fact that the petrol import tax at that time was at a record high of 40 percent.
In the last two months, the crude oil price has increased by 71 percent from $42 per barrel to $72, while the price once hit the $79 per barrel threshold. If the crude oil price continues moving up, petrol importers may seek permission for another price increase.
Pham Huyen
vietnamnet
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