Vietnam’s latest fuel price hike spikes inflation concerns

By Dat Nguyen   October 7, 2018 | 11:13 pm PT
Vietnam’s latest fuel price hike spikes inflation concerns
An employee pumps petrol into a car at a petrol station in Hanoi, Vietnam. Photo by Reuters/Kham/File Photo
Last weekend’s increase in fuel prices has stoked fears that Vietnam might not meet its 2018 inflation target.

The ministries of Industry and Trade and Finance upped fuel price last Friday, and prices of biofuel E5 RON 92 went by VND675 per liter to VND20,906 (90 cents) and that of RON 95 by VND577 to VND22,347 (96 cents).

Kerosene prices went up by VND485 to VND17,086 (73 cents) per liter and that of mazut oil by VND752 to VND15,694 (67 cents) per kilogram.

The ministries said that the increase in domestic prices followed a rise in world fuel prices of 3-5 percent over the last 15 days.

They said that a RON 92 barrel costs $90.36, RON 95, $92.40 and diesel, $96.89.

This was the third fuel price hike since early September. In this period, the per liter price of E5 RON 92 went up by VND1,296 (5.6 cents) in total, while that of RON 95 rose by VND1,170 (5 cents).

While the latest increase has raised concerns among economists that Vietnam will not be able to meet its inflation target for the year, transportation businesses are worried about immediate impacts.  

Lam Dai Vinh, director of a cargo business said that he had to raise his service prices as fuel price accounts for 40 percent of his costs.

Although his customers were not happy, Vinh told local media that he had no other choice.

Economist Nguyen Tri Hieu said that the fuel price hike is one of the contributing factors to higher consumer price index (CPI).

Costs will increase for businesses, which in turn, will lead to higher goods prices and therefore affect inflation, he told VnExpress International.

“It is unlikely that Vietnam will be able to keep inflation below its target of 4 percent this year,” Hieu added.

Echoing Hieu, Ngo Tri Long, former director of the Market Research Institute under the Ministry of Finance, said that there are “variables” in the market that could negatively affect inflation this year.

Inflation was at 3.57 percent from January to September this year, according to the General Statistic Office.

Experts are concerned about other factors that could lead to higher inflation, including the Vietnamese currency, dong, falling against the US dollar as a result of the U.S.-China trade war and natural disasters that often occur in the second half of the year, making business target more difficult to meet.

Oil firms grow

However, local oil firms are seeing robust growth because of higher oil and petrol prices.

PetroVietnam Drilling (PVD) saw the price of its stock on the HCMC Stock Exchange (HOSE) increase by 65 percent in the last 30 days because of increasing world prices.

From September 21 to October 6, crude oil prices went up from $78.9 to $88.81 per barrel, while that of RON 95 rose from $84.16 to $92.4 per barrel.

PVD board chair Do Van Khanh said that when crude oil prices go above $60 per barrel, the company’s oil rigs will not have to be put on hold, and when it reaches over $70, business will become stable.

PetroVietnam Gas also saw revenues up by 41.5 percent in the first half of this year, because oil prices rose 36 percent year-on-year in the same period.

The price of its stock on HOSE has gone up by over 40 percent to VND120,000 ($5.15) since early July.

Vietnam’s fuel price is set to increase even more next year when the new environmental tax approved by the National Assembly’s Standing Committee takes effect.

Starting January 1 the tax on petrol will increase from VND3,000 (13 cents) per liter to VND4,000 (17 cents), and on diesel from VND1,500 to VND2,000.

The hike was scheduled for next year so that the government could keep inflation under 4 percent this year.

Although the plan met strong public opposition during its draft phase, authorities defended it, saying it would bring VND15.7 trillion ($676.8 million) each year to the government’s coffers, and help to deal with environmental issues.

In the first half of this year, Vietnam imported 7.07 million tonnes of fuel worth $4.66 billion, up 40.4 percent in value from the same time last year, according to Vietnam Customs.

The country exported 1.6 million tonnes of fuel, worth over $1 billion, up 41.7 percent in value.

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