On November 7, the Ministry of Finance and the Ministry of Industry and Trade decided to drastically reduce gasoline prices amid the gloomy context of the world oil prices. The petrol price reduction is good news for consumers but declining global crude oil prices have negatively impacted the nation’s budget revenues.
On the sidelines of the ongoing eighth National Assembly (NA) session, Minister of Industry and Trade Vu Huy Hoang told a VOV reporter that the sharp fall in global crude oil prices would affect Vietnam, which is a crude oil exporter.
|Minister of Industry and Trade Vu Huy Hoang.
"Crude oil prices have dropped steadily even to a low record in recent years. Recently, the shrinking world oil prices have forced the price of petroleum products down. In return, it is conducive to Vietnam that imports up to 70% of petroleum products for domestic consumption. However, falling oil prices (from US$100/ barrel in 2013 to only between US$75-76 currently) have put crude oil exports at a disadvantage as a result of declining revenues from crude oil exports. It is difficult to export crude oil at high prices and import petroleum products at low prices.” Hoang said.
Regarding current oil production costs in Vietnam, Minister Hoang said the nation gain low profits if crude oil is exported at just US$76/ barrel.
“Vietnam needs to increase crude oil reserves in a bid to face a continued further drop in gasoline prices in the time ahead , ensure energy security and cope with disadvantages in domestic oil exploration and production.” the Minister noted.
To deal with falling oil prices, according to Minister Hoang, it is imperative to intensify market research and forecast to adjust exploitation plans in line with the actual needs.
Economic experts have predicted that a continued fall in oil prices in the next three months would greatly affect budget revenues, requiring adjustments in reducing revenue targets for 2014-2015. However, Minister Hoang said the adjustments have not yet been scrutinized while the NA is considering the approval of resolutions on socio-economic development and State budget performance for 2015.
According to an analysis by the Minister, the current global oil market is becoming unpredictable and complex in the wake of political unrest between oil exploiting and importing nations and territorial disputes. All these factors are related to fluctuations in oil prices.
How current political conflicts between countries in different regions would be, cannot be predicted, resulting in inaccurate forecasts of trends in the global oil exploitation and consumption.
“What we can do now is to further step up communications, grasp the situation and paint some scenarios to cope with negative events to ensure the most effective oil exploitation. This is a question raised to the Vietnam National Oil and Gas Group (PetroVietnam) and relevant ministries including the Ministry of Industry and Trade.” Hoang stressed.
The scenarios put forth by the Ministry of Industry and Trade include: Oil prices could continue to fall as currently; oil prices could surge gradually and then likely see abrupt increases.
In terms of gasoline price management, Minister Hoang said adjustments in petrol prices under Decree No 83 became effective as of November 1, 2014. All related to the adjustment must be considered by the Ministry of Finance and the Ministry of Industry and Trade.
Since early this year, fuel prices have been adjusted 8 times. Total money from discounted amount was higher than that of price increases. It is too early to give proper assessment of the pros and cons of Decree No 83 which just recently took effect.
Some new features in the Decree would create more opportunities for oil and gas enterprises to compete more promptly thus delivering benefit to consumers. More companies engaging in the petrol retail market would force businesses to improve customer care services and promote technological advances in the distribution and sales system thereby providing leverage for the stronger growth of the petrol market, Hoang said.