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Govt considers fuel subsidy
The government may subsidise fuel in Laos if the price of oil in world markets continues to rise, according to senior officials from the Ministry of Industry and Commerce.
The officials, who manage fuel prices in Laos, said yesterday the ministry had already issued a proposal to the cabinet considering fuel subsidies as one way to stabilise the price of fuel.
Rising fuel prices have the government considering a subsidy.
“The government would expect to lose more than 70 billion kip a month through fuel subsidies,” said one of the senior officials who asked not to be named.
The ministry proposed the subsidy as costs at the petrol pump continue to rise due to increasing oil prices in global markets.
In Vientiane, the current price for premium petrol is 11,040 kip per litre, with regular petrol costing 9,940 kip per litre, and diesel 8,780 kip per litre.
In the provinces of Khammuan, Savannakhet, Champassak, Bokeo and Xieng Khuang, premium petrol costs between 11,060 and 11,170 kip per litre, regular petrol 9,990 to 10,220 kip per litre, and diesel 8,820 to 9,090 kip per litre.
Fuel prices are likely to keep rising amid fears that unrest in the Middle East will disrupt global oil supplies. Some analysts are predicting oil could climb as high as US$200 per barrel this year.
The Lao government subsidised fuel at the end of 2008 when the global oil price reached a historical high of US$140 per barrel, with the subsidy keeping the price in the domestic market below 13,000 kip per litre.
The government maintained its high reference price for imported fuel into early 2009 when the price of oil dropped to as low as US$50 per barrel, not wanting to lose the revenue earned from taxes.
According to the Lao Petroleum and Gas Association, fuel consumption in Laos is expected to rise to more than 750 million litres this year. Consumption increases by an average of 7 to 10 percent each year. About 45 to 50 percent of all fuel imported is used in Vientiane and Vientiane Province.
Food prices in particular have already increased as fuel costs rise and there is concern that increasing fuel prices could lead to even greater rises in food prices, causing inflation to soar and squeezing already tight household budgets.
The World Bank has expressed concerns that increasing prices of fuel in the world market could lead to higher food prices around the world since oil is essential for food production and transportation.
Asean member countries have already put measures in place to prevent rapid increases in food prices, particularly rice, which is the staple grain in South East Asia.
A number of countries, including Thailand, have already introduced fuel subsidies to curb inflation.
vientiane times
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