The recent increase in petroleum prices has caused surprise and worry among consumers who were not expecting it based on signals from relevant agencies.
Consumers unhappy with current petrol price regulation mechanism
On the evening of July 17 the ministries of Finance and Industry and Trade allowed petroleum traders to increase fuel prices by nearly VND500 per litre. The decision brought prices for 92 octane gasoline to VND24,570 (USD1.21) per litre, diesel to VND22,310 (USD1.06) per litre and kerosene to VND22,020 (USD1.04) per litre.
This is the fourth petroleum price hike since the beginning of the year and the third consecutive price increase over the past month.
Associate Professor, Dr. Ngo Tri Long, said the frequency of recent petrol price hikes is quite unusual. They have driven the price of petrol up by VND2,691 per litre.
“During this slump in business and slow market demand, these price hikes are considerable. I wonder why the Ministry of Finance doesn’t use a tax tool at this moment to support petrol firms and ease the burden on consumers,” Long commented.
Economist Le Dang Doanh said, “It’s understandable that domestic petrol prices are increased in accordance with the rise in prices on the world market. However, statements made by relevant authorities only seem to confuse the public."
The decision to increase petroleum prices starting at 8pm on July 17 was made only eight hours after these authorities announced that they were considering cutting import taxes, would continue to use the petrol price stabilisation fund and hold off on making any decision on price hikes.
Several experts have commented that the authorities have been inconsistent in their statements and actions. .
“The current petrol price regulation mechanism seems to be transparent, but the authorities don't monitor the actual situation of petrol firms. Rather they often make decisions based solely on complaints of losses by these firms," he said.
Doanh attributed the situation to the fact that relevant authorities do not want to announce any price increases in advance for fear of speculation.
“In order to improve public confidence, it’s necessary to improve coordination between relevant authorities and avoid inconsistencies between their statements and their decisions in the future,” Doanh noted.
Ta Van Thang, of the Finance Ministry's National Institute for Finance and Economics, said the current inadequacies in the petroleum market are a result of monopoly in petrol trading and a lack of transparency in the market.
Among 17 petrol wholesalers, Vietnam National Petroleum Group (Petrolimex) holds the largest market share. This has forced the remaining companies to follow suit in terms of pricing, leaving consumers with little choice as there is little difference in cost between products.
Nguyen Tien Thoa, General Secretary of Vietnam Price Appraisal Association, said the current pricing mechanism, based on the average price in the world market for a month, is inadequate. He proposed changing the timeline to ten days to better keep up with changes in the market.