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Petrol price should be VND 8-9,000/litre   2008-12-10 - NLD

Petrol distributors all say they set up domestic prices close to the world’s oil prices. However, despite the sharp falls of the oil prices, they have deliberately still not lowered the retail petrol prices.


The  crude oil price in the world moved up slightly, to over $43/barrel, after falling to below $40/barrel late last week. However, even the $43/barrel level was considered to be a low level, considering the past four years. With such a price, economists believe that petrol importers are profiting VND 3-4,000 per liter from petrol.


It is expected that the oil price will keep decreasing, possibly to $25/barrel, due to the spreading global financial crisis. In Vietnam, seven retail price adjustments have been made since October. A92 petrol, the most popular product, has seen prices cut by VND 7,000/litre to the current price of VND 12,000/litre.


According to Dr. Nguyen Minh Phong, from the Hanoi Socio-economic Development Institute, the current retail petrol price in Vietnam has remained overly high when compared to the crude oil prices in the world market. Phong has attributed the tardiness in adjusting the petrol price to a lack of a mechanism on market control.


Phong said that the state needs to have a mechanism which allows it to control prices. The petrol market is not really a competitive market, and if enterprises have a great deal of power, this will affect the benefit of customers.


Economists said that even when petrol importers have to pay the high tax of 35% instead of 25% (the Ministry of Finance has raised the import tax from 25% to 35%), they can still sell petrol at lower prices. With the oil price at $45/barrel, the retail petrol price after the import tax, luxury tax, and value added tax, fees should be VND 8-9,000/litre.


Vuong Thai Dung, Deputy General Director of Petrolimex, which is holding 60% of the distribution market, has affirmed that Petrolimex has been trying to set the domestic prices close to the international prices.


When asked why Petrolimex has not slashed the petrol price to make it closer to the current $43/barrel oil price level, which is the same as the oil price seen in mid-2004 and early-2005 (at that time, the domestic retail petrol price was at VND 6-7,000/litre), Dung said that it is because of the different exchange rates between now and 2004-2005.


In 2004-2005, one dollar was converted into VND 13,000/US $1.00, while now one dollar is equal to VND 17,000. Dung also said that in 2004-2005, the state still compensated for petrol importers’ losses caused by the sales being below the import prices, while the bank interest rates were very low.


Dung affirmed that the current petrol price at VND 12,000/litre is still lower by between several hundred VND to several thousand VND per litre than the prices in other regional countrie, like Thailand, China, Cambodia and Laos.


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