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Petrol prices raised, what next?
People always expect that the prices of goods will increase after a petrol price hike. However, analysts have reassured the public that the price increases will not be big this time.
Consumer product prices will not see big changes
Petrol prices have increased four times since early April 2009 by a total of 2,500 dong per litre (22.6 percent).
Consumer goods did not increase in price after the previous three increases. The prices of several products, including vegetable oil and fresh meat, increased by a little, but this was attributed to higher import taxes or higher input material prices rather than the petrol price hike.
Therefore, Nguyen Thai Dung, Deputy General Director of Big C, believes that the latest 5 percent petrol price increase will not cause any big changes.
“The retail prices of some kinds of goods may increase in some days, but only on the free market and because of people’s psychology,” Dung said. By ‘psychology’, Dung means that people always think that a petrol price hike is followed by consumer good price increases.
Dung does not think that producers will raise sale prices considerably, saying that the 4 percent interest rate subsidy programme has helped enterprises’ production costs decrease and helped them slash sale prices.
Meanwhile, petrol and oil just account for 5-7 percent of the production cost of many kinds of products, while spending on input materials and labour force gobbles the biggest sums of money of enterprises. Therefore, with just the modest price increase of 700 dong per litre of petrol, the prices of goods will not increase sharply.
Dung said that to date, Big C has not received any notices from suppliers about tentative price increases. In general, suppliers have to announce price increase plans two weeks in advance.
“In the current context, if producers do not share difficulties with consumers, they will not be able to survive and develop,” Dung said.
Vu Thi Hau, Deputy General Director of Fivimart, agreed with Dung, saying that there are many producers and suppliers on the market, therefore, if some offer uncompetitive prices, they will be dislodged from the market.
Hau believes that the prices of goods offered by supermarkets will be stable for the first two weeks of July. After that, prices may increase, but just by a little.
Steel production cost will be 60,000 dong per tonne higher
Tran Thi Hang, Senior Official of the General Statistics Office, believes that the petrol price increase will surely influence the consumer price index and affect the production costs of many industries.
According to Nguyen Tien Nghi, Deputy Chairman of the Vietnam Steel Association, it costs 40 kilograme of mazut to churn out one tonne of steel. As the mazut price has increased by 1,500 dong per kilogramme, the production cost of every tonne of steel will be 60,000 dong higher.
As steel mills plan to churn out 1.9 million tonnes in the second half of the year, they will have to spend 114 billion dong more to make steel.
Nghi has forecast that the steel price will increase by 60,000 dong per tonne to cover the mazut price increase. He said that the price increase may be even higher if counting on the additional transport fees from the diesel price increase.
Chairman of the Vietnam Automobile Transport Association Nguyen Manh Hung said that the petrol price has increased by 30 percent since April, while diesel by 20 percent, which will force transport companies to raise transport fees, since fuel accounts for 40-45 percent of total transport costs.
VietNamNet, TBKTVN, TP
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