Friday, January 04, 2008

Vietnam holding fuel prices low

Petrol price not to be raised right now: MOF
11:24' 04/01/2008 (GMT+7)

VietNamNet Bridge – The world’s crude oil price unexpectedly soared to $100/barrel on January 2, 2008. Experts say that with such a crude oil price, the domestic petrol retail price should be VND17,000/litre.


However, an official from the Ministry of Finance (MOF) yesterday confirmed that there would not be any price adjustment in the immediate time.

The official said that the crude oil price is expected to escalate further in the days to come, but MOF will not consider any proposal on raising petrol price at this moment.

He said that MOF is considering the plan to stabilize the petrol market, under which petrol importers would be required to contribute to a fund to hedge against volatility in global prices.

Importers will have to contribute a part of their profits to the fund during times when import petrol prices are low. When world prices climb, they would receive rebates from the fund in return for keeping a lid on domestic retail prices.

If the scheme is approved, the petrol prices will be much higher than the currently applied ones, because the domestic price levels would be closer to the world’s prices.

The recently promulgated Decree 55 on regulating petroleum prices said that petrol importers and distributors can define the retail prices for petroleum products themselves. However, in fact, they only have the right to propose to adjust petroleum prices only, while the proposals must be approved by relevant ministries to become effective.

If the plan is approved, enterprises will be given more autonomy in defining the petrol retail prices. They will have to inform the Ministries of Industry and Trade and Finance the prices they plan to apply for the whole years.

At this moment, when the crude oil price surged to $100/barrel and has been staying firm at $97/barrel, Vietnamese importers have been incurring loss.

Singapore, the main supplier of petrol to Vietnam, offered A92 petrol at $105.4/barrel yesterday. With such a price, petrol importers are incurring the loss of VND1,500/litre. Meanwhile, with the price of diesel soaring to $113.73/litre, importers are incurring the loss of VND2,435/litre.

In 2007, Vietnam raised the petrol retail price five times as the result of the increased oil prices in the world. The latest price increase occurred on November 22, 2007, when the world’s crude oil price hit the $99/barrel.

The sharp increases of petrol prices in 2007 were one of the reasons behind the high inflation rate of 12.63% in 2007.

The import petrol prices:

Date

Price/barrel

Dec 14, 2007

$98.9

Dec 21, 2007

$96.7

Dec 27, 2007

$101

Dec 28, 2007

$102.8

Jan 1, 2008

$102.4

(Source: Tuoi tre, VNE)