As world crude oil prices remain above US$50 a barrel for the past 20 days, some think it is high time the government bites the bullet and raises retail prices or subsidised imported petroleum products.
“It is difficult to avoid increasing domestic oil prices under Decision 187 issued by the prime minister, however, it will take some time to closely track possible developments while carefully adjusting prices,” said Phan The Rue, acting vice trade minister in an interview with Saigon Giai Phong newspaper on October 20.
According to the government’s guideline, when the crude oil price climbs to over US$50 a barrel, gasoline and oil importers will be allowed to add from 5% to 10% to their retail prices. Shouldn’t domestic prices be increased to reflect world prices?
Under prime minister’ s decision, from June 20, the government no longer subsidises the loss for imported petrol and importers themselves have to ensure their operations. With regard to oil alone, the government is continuing to offset losses (the government makes an advance payment for 90% of losses per month).At present, although world crude oil price exceed the US$50 a barrel level, we have not readjusted domestic gasoline and oil prices for the following reasons: This year, gasoline and oil prices have fluctuated unusually. The gasoline and oil domestic price readjustment in accordance with the world high prices has been approved in principle by the prime minister but the Ministry of Finance and the Ministry of Trade have to closely follow the possible developments at the time of price readjustment so that the government will neither subsidise too much losses for importers nor shock consumers to contain price increases.
Is it possible to affirm that oil and gasoline domestic prices will be stable in the near future ?
Both ministries are checking importers’ business activities, especially gasoline business so as to see whether the profits gained in July, August and the first 20 days of September would cover the loss incurred in late September and early October. In case crude oil world price remains high until the end of October and that importers continue to suffer too many losses to survive, the trade ministry will be forced to consider allowing gasoline importers to add 10% to their selling prices.
Oil importers are suffering great losses (nearly 1,300 dong for every litre of diesel and about 1,400 dong per litre of kerosene). How will the government deal with this problem ?
From now to the end of 2004, oil prices will not be readjusted because these are the input materials for production. The government will go on subsidising oil importers. Concerning gasoline, there will be no subsidies because these items are mainly consumed by the general populace.
How will the world higher oil and gasoline prices affect the objective to stabilise prices and contain inflation according to the trade ministry?
Of course, the high world oil price is having a negative impact on the objective to stabilise domestic prices. The point is how to rationally increase local oil-based product prices. At present the government is taking control of oil and gasoline prices and although companies have self-mastery of these items, the government is controlling prices to prevent them from hiking prices too high. With regard to other materials such as steel, chemical fertiliser, pulp, and medicine it is mandatory to control their input prices regardless of the world higher prices. For a period of time domestic prices of goods have irrationally risen due to mismanagement in distribution.