Petrol price to be kept under 12'000 Dong

Minister of Trade Truong Dinh Tuyen said late last week during a press conference and online chat with the public that the petrol price would be kept under VND12,000 per litre in 2007.

The petrol price in several neighbouring countries has escalated to VND14-15,000 per litre. However, Mr Tuyen said that the levels cannot be applied for Vietnam, as Vietnamese people still cannot afford the levels. If the world’s oil price increases further to overly high levels, the State will reduce the import tax to 0% to help petrol importers minimise losses.

Under newly promulgated Decree No 55, oil and petrol trading companies have the right to define selling prices themselves. Mr Tuyen said that if oil and petrol trading companies still incurred losses even though the State imposed 0% on imports, the Government might apply the previously applied scheme, under which the Government determined selling prices.
“We cannot predict everything. In case of emergency, we have to use emergency measures,” Mr Tuyen said.

The domestic petrol price is now lower than the world’s average price level, which makes people think that once Decree 55 becomes effective, and allows distributors to define the selling prices themselves, the petrol price will increase promptly. However, Mr Tuyen has denied the scenario.

“In principle, enterprises have the right to define selling prices after May 1. However, no enterprise has registered to raise its selling prices so far,” Mr Tuyen said.
He said that enterprises would consider many factors, including speculation and the capability of incurring losses.

“If I were the director general of Petrolimex, I would not raise the selling prices soon after the decree becomes effective, as I hate speculation,” Mr Tuyen said. If enterprises intend to raise selling prices, their sales agents will know in advance and they could speculate to make profit: i.e. the profit of enterprises would flow to sales agents.

Deputy Director General of Petrolimex Bui Ngoc Bao said that the world’s oil price was decreasing, so Petrolimex would keep close watch over the world’s price for some time more before making decisions about prices.

However, he said that enterprises would develop their own business plans, and as they had been losing money for two months they would likely raise selling prices.
Mr Tuyen stressed that giving enterprises the right to define petrol prices did not mean that the State would float the market. He said that the State would still keep control over the market and petrol prices.

Oil and petrol trading companies must register price adjustments with relevant ministries, and if it finds that the price adjustment is not suitable, the ministries will ask the companies to stop their plans.

The petrol prices may go up and down, but the price increases must not exceed the price increase level of 7% set by the National Assembly.

Mr Tuyen has also announced the State would gradually reduce subsidies on diesel and mazut. It is estimated that by the end of this year, mazut oil will be priced based on the supply and demand basis, while a similar scheme for diesel will be applied in early 2008.

Source: VNE