Fuel wholesalers can extract up to VND2,000 for each liter of gasoline and VND650-1,150 for every liter of oil from the price stabilization fund to cover their losses and keep the current retail prices unchanged.

This is a decision of the Ministry of Finance given in Dispatch 2624/BTC-QLG on fuel price management signed by Deputy Minister Nguyen Cong Nghiep this Tuesday and announced on Wednesday.

A right move

Fuel wholesalers are suffering losses of VND986-2,319 per liter, according to the finance ministry.

In particular, the base price of RON 92 petrol is currently VND25,469 per liter, while the retail price is only VND23,150. Similarly, each liter of diesel oil 0.05S, kerosene and fuel oil is now sold for VND21,550, VND21,600 and VND17,650, while their base prices are VND22,683, VND23,062 and VND18,636 respectively.

However, to ensure macroeconomic stability and curb inflation, the finance ministry has decided to keep fuel prices, import tariffs and deductions for the price stabilization fund unchanged.

To offset their losses, wholesalers are allowed to increase the extractions from the price stabilization fund for all kinds of fuels.

Specifically, they can now use VND2,000 for each liter of petrol, VND800 for diesel oil, VND1,150 for kerosene and VND650 for fuel oil, up from the respective levels of VND1,000, VND400, VND700 and VND600. The new levels were effective at 9 p.m. on Tuesday.

In addition, the finance ministry asked fuel wholesalers to share the burden with the State and consumers by not including the profit margin of VND300 per liter in fuel prices.

In a document sent to the media, the ministry stated it and the Ministry of Industry and Trade will manage fuel prices according to the market mechanism under the spirit of the Government’s instructions, namely Decree 84/2009/ND-CP and Resolution 01/NQ-CP.

Depending on the situation in the world and at home, the two ministries will flexibly adopt price stabilization measures and other financial tools to keep fuel prices stable and thus contribute to macroeconomic stabilization and inflation restraint.

Moreover, the ministries will inspect the market and guarantee supply-demand so that fuel trading can be carried out normally.

In the context of rising input costs, it is good news that fuel prices are not increased, said Tran Anh Huy, director of Huy Phat Company specializing in animal feed materials.

If fuel prices were raised, the production costs would be pushed up, but producers could not increase selling prices, and thus they would suffer profit declines. Additionally, when fuel prices were hiked, prices of multiple items, transport charges and labor cost would also shoot up, he told the Daily.

Economist Ngo Tri Long deemed the decision of the finance ministry as a right move, helping prevent inflation from flaring up again and relieve the burden on enterprises in the context of production stagnation and poor consumption.

Worries remain

However, experts and entrepreneurs said this solution was full of risks. A fuel wholesaler in the south warned against speculation and smuggle as Vietnam’s retail RON 92 petrol price is currently VND2,000 per liter lower than China’s price, VND4,000 lower than Laos’ and VND5,300 lower than Cambodia’s. That is to say fuels can flow to neighboring countries via illicit trade practice.

If global prices surge further, exhausting the price stabilization fund and other resources, then there would be a sudden fuel price spike, giving a shock to the economy and causing displeasure of consumers, he said.

Sharing the same view, Huy said it might be just a matter of time before fuel price hike occurred, explaining that the resources of the economy are running out. Then, enterprises would have to endure higher fuel prices and how long they could endure would depend on the world’s situation and the ability of each enterprise, he said.

Economist Long said that if the global price of RON 92 petrol remained at US$130 per barrel, the local price could not be restrained for so long.

A viable solution for the coming time is the State, fuel wholesalers and consumers share the burden when global prices fluctuate, he suggested. In other words, fuel prices will be raised, import taxes will be reduced and the profit margin for wholesalers will be cut at the same time.

Long remarked the management agencies were still unable to respond quickly to fuel price fluctuations, bringing many difficulties to traders and consumers.