Reducing the impact of gasoline prices on the price level

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Reducing the impact of gasoline prices on the price level
The Ministry of Industry and Trade has asked main petroleum businesses to ensure supply in all situations Photo: Nguyen Thanh

Under pressure of upward adjustment from world prices

As forecast by the Ministry of Finance, during the petroleum operating period on February 11, gasoline prices were adjusted up and this is the 3rd consecutive increase since the beginning of 2022.

According to the Ministry of Finance and the Ministry of Industry and Trade, world petroleum prices have increased continuously since January 21. Supply is scarce due to geopolitical factors in the Middle East. In addition, high inflation in many large countries such as the US and China also increases global petrol prices. Along with that, the lack of local supply in the country is another factor affecting the increase in petrol prices.

Facing this situation, the Inter-Ministry of Finance – Industry and Trade also spent VND200 from the Petroleum Price Stabilization Fund to make up for each liter of E5 RON 92 petrol. Fund expenditure for RON 95 petrol is VND0. Fund expenditure for diesel is still VND400 per liter, oil is down to VND100 per liter compared to the operating period at the end of January.

Assessing the factors affecting price management in 2022, the Price Management Department under the Ministry of Finance said that petrol prices will be one of the important factors affecting this work. Petrol prices are forecast to be under great upward adjustment pressure from world prices, putting great pressure on the price level in general and the prices of commodities using petroleum as an input for production.

However, according to Assoc. Prof.Dr. Dinh Trong Thinh, Senior Lecturer at the Academy of Finance, petrol prices will not increase as sharply as in 2021 because OPEC + countries also do not want to let petrol prices get too high, damaging the world economic recovery and pushing economies to find alternative energy sources, but it will still try to keep crude oil prices stable at US$80-90 per barrel.

Facing the trend of increasing prices of raw materials and energy products after Tet, the Ministry of Finance has suggested that ministries, branches and People’s Committees of provinces and centrally-run cities need to focus on controlling prices from the first months of the year.

For petroleum products, the Ministry of Finance requested the Ministry of Industry and Trade to proactively capture world petroleum price movements, and closely coordinate with the Ministry of Finance to calculate usage levels and set an appropriate price stabilization fund in order to limit the impact on the domestic market after the Tet holiday.

The adjustment period is reasonable

According to Deputy Minister of Industry and Trade Do Thang Hai, in general, the domestic petroleum supply is still basically guaranteed.

Normally, the Nghi Son Refinery and the Dung Quat Oil Refinery Plants have met about 75% of the domestic market’s gasoline demand, the amount of petroleum that needs to be imported is only 25%.

From the beginning of January 2022, because Nghi Son Refinery and Petrochemical Plant had to cut production capacity, it affected supply. Therefore, the key enterprises need to increase imports to make up for the shortfall, so the market is a bit “troubled”.

In this situation, the Ministry of Industry and Trade has asked the main petroleum businesses to ensure supply in all situations, even in the worst case when Nghi Son Refinery and Petrochemical Plant stops production. Particularly for PVN, the Ministry of Industry and Trade requires an early, specific and detailed notice on the situation of petroleum supply, so that petroleum wholesalers can proactively plan imports to make up for the shortfall. Deputy Minister Do Thang Hai said it is necessary to resolutely handle violations in petroleum business activities such as speculation, hoarding, or trickle-selling. If there is no legitimate reason, it is necessary to suspend operations, revoke licenses of the offending petrol station, and handle traders and key businesses.

Predicted the evolution of gasoline prices as well as its impact on stabilizing and controlling inflation, on February 10, Deputy Prime Minister Le Minh Khai, Head of the Steering Committee for Price Management, signed Document No. 882/VPCP-KTTH requesting ministries, branches, localities and relevant agencies to organize and closely monitor developments in supply and demand, market prices of important and essential commodities to take measures on operating, stabilizing prices appropriately, as well as controlling inflation.

In particular, there have been separate directives for petroleum products. Accordingly, the Deputy Prime Minister requested the Ministry of Industry and Trade to continue closely coordinating with the Ministry of Finance to find solutions to ensure supply and stabilize the market; manage petrol and oil prices flexibly, ensure that domestic gasoline prices reflect and closely follow developments in world petroleum product prices, rationally use the Petroleum Price Stabilization Fund with appropriate dosages, contribute to controlling inflation, support production and business activities of enterprises, and stabilize the market, as well as domestic petroleum supply and demand.

Notably, regarding the proposal to shorten the operating time to 5 days or less to keep prices more closely aligned with the world market, Nguyen Anh Tuan, Director of the Price Management Department, Ministry of Finance, said the current 10-day adjustment cycle is reasonable because it is related to the buying and selling practices of the private petroleum wholesalers when their average delivery is around 10 days. Along with that, the Ministry of Finance and the Ministry of Industry and Trade also need time to update the information to operate accordingly. Moreover, we must also implement price stabilization for consumers.

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