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Gasoline shortage is a management crisis

October 11, 2022 | 09:03 pm PT
Tran Huu Hiep Economist
"We cannot bear this loss anymore; the more gasoline we sell, the more money we lose," the owner of a gas station in the Mekong Delta said.

He had to complete countless procedures to set up his gas station: consulting the national investment agenda, changing the land-use purpose, seeking permits for the construction rights and installation of gas pipes, fire safety, environmental license, measurements and quality controls, sales certificates ... the list goes on.

Now with the gas station needing to close, he, and many others like him, feel as if all those efforts were in vain.

Meanwhile, the few gas stations that remain open face great resentment from the public, mainly because queues to buy fuel take forever.

Sometimes, the resentment takes a rather extreme form: On October 6, after waiting for long to fill his motorbike at a HCMC pump, a man whipped out a knife and attacked the staff.

The gas shortage is severe, especially in the larger cities. This begs the question: What is the role of the government in ensuring availability of such a critical resource?

Pressure is intensifying on the Ministry of Industry and Trade. Even as the gasoline issue exercised the public, its chiefs provided no clear answers, and all people heard were "plans" and "promises" from importers and refineries, which could take months or years to implement.

Gas stations closed while distributors remain silent. Gasoline importers invented new and incomprehensible excuses. Who can provide assistance to people who have no fuel for transportation and potentially no means to take care of their families?

"Will the public have enough gas for this month?" was a simple yes or no question that no manager answered sufficiently.

Oil is a strategic resource that directly influences the prices of all goods and services used in daily life.

When the price of fuel falls, gas stations everywhere are hesitant to sell, due mainly to concerns about profits. They make excuses, "maintenance" being the most common one, to close down. But soon the public becomes furious, and owners then come clean: as a private business, they just cannot operate at such a loss.

The government plays a role in managing the distribution of fuels through national-level distributors, changing policies and using public funds to subsidize prices.

Many distributors, faced with a likelihood of rising demand, pay high prices to stock up large volumes and potentially make profits as the price further escalates.

But if international prices then fall, the government could reduce the price cap, leading national distributors to cut the profits of retailers, forcing them to operate with low profits.

The more gas stations sell, the more they lose since with no or low margins on fuels, they bleed money on wages, transportation, tax, etc, forcing them to close down until the business becomes somewhat profitable again.

To address this problem, the government needs to consider the benefits of all stakeholders down to small corporates and consumers instead of just itself and major distributors as it does now.

Therefore, a re-evaluation of fuel prices with operatable level of profits for all stakeholders in the distribution chain is essential. This will help limit the unpredictability of gas distribution.

The current situation cannot be addressed by punishing private businesses. Penalties, legal sanctions and even forced closures will be tantamount to a gentle breeze blowing at a giant iceberg waiting to sink the Vietnamese economy.

*Tran Huu Hiep has a Doctorate in Economics and is the deputy chairman of the Mekong Delta Tourism Association.

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