The sharp hike in the prices of retail fuel products late last week will likely continue in the remainder of the year, given rising fuel prices across the world. The higher prices will be reflected in higher production costs and consumer goods prices, leaving an impact on the consumer price index, according to experts.

A motorcycle is refilled at a gas station in HCMC 

Last Saturday, the ministries of finance, and industry and trade increased the prices of E5 RON92, RON95-III and diesel 0.05S by VND675, VND577 and VND485 to VND20,906, VND22,347 and VND18,611 per liter, respectively. These are the highest prices recorded in the last few years.

According to the ministries, global petrol prices have risen sharply in the recent period. On October 2, each barrel of RON92 gasoline was traded at US$92.50 in Singapore, the highest since November 2014. Similarly, each barrel of diesel 0.05S was traded at US$100.14 in that country on October 3, the highest since October 2014.

Associate Professor Ngo Tri Long, former director of the Price Market Research Institute under the Finance Ministry, told Lao Dong newspaper that domestic fuel prices are unlikely to drop in the coming period, as global fuels are in short supply.

He explained that the political tensions in the Middle East have affected the oil exploitation of regional countries. As such, the shortage of raw materials may push up the prices of finished products to over US$100 per barrel.

Economist Nguyen Tri Hieu echoed this view, noting that petroleum prices could rise until the end of this year. These prices significantly affect inflation because fuels are a key input for all sectors and social activities.

Hieu predicted that keeping this year’s inflation below 4% would be a difficult task if fuel prices further surge. In addition, Vietnam’s economic growth is highly positive, at over 6.7%. An economy that grows at this level is bound to push inflation up, as economic development entails money injection into the economy.

Another economist, Le Dang Doanh, noted that hikes in retail fuel prices would reduce the competitiveness of the Vietnamese economy and affect the headline consumer price index.

Lam Dai Vinh, director of an HCMC-based goods transport company, told Thanh Nien newspaper that the fuel price accounts for as much as 40% of transportation costs. Therefore, sharp and consecutive increases in fuel products would force his company to revise upward their goods transport fees.

Earlier, at a meeting of the Steering Committee of Price Management on September 28, Deputy Minister of Industry and Trade Do Thang Hai suggested rescheduling the environmental protection tax hike on fuels to a more appropriate time, rather than early next year as planned, as the hike may increase inflation.

The environmental protection tax on fuels is slated to increase to VND4,000 per liter, from the current VND3,000, after a draft resolution involving the hike was passed by the National Assembly Standing Committee. The effective date of the hike will coincide with the 12th lunar month near the Tet holiday and will increase fuel prices, thus affecting the CPI, said Hai.

SGT