Many National Assembly deputies at the 3^rd National Assembly Session, which took place on May 6 – June 8, when the world’s oil price was at $125/barrel, expressed their doubts over the possibility of keeping petroleum prices in place until the end of June. The deputies estimated that if the world’s oil price increased by $100-110/barrel, the state would have to pay VND 12 trillion to subsidise petrol prices.

However, their estimates have proved to be too low, as the oil price has approached $140/barrel, or much higher than levels the deputies imagined. With the current petrol retail price at VND14,000/litre, importers are suffering a loss of VND4,000/litre for A92 petrol and VND6,000/litre for diesel, which means that the state has to spend no less than VND 1 trillion a month to compensate for importers’ losses.

In fact, the Government has been urged to raise the petroleum retail price in order to ease the burden of petrol subsidization on the State budget. India, Malaysia, Indonesia and Taiwan have all decided to cut subsidization and raise their domestic retail prices. The petrol price in Malaysia, for example, soared dramatically from ringgit1.92 to ringgit2.7, or 40.62%, on June 5. China also sharply raised the retail price by 18% on June 19 to $0.75/litre, an unexpected move, as people had believed that the country would not raise the sale price until after Beijing Olympic ended in August.

However, experts say Vietnam should not follow their move as a petroleum price increase at this sensitive moment would kill all the efforts Vietnam has been making to fight inflation.

After the A92 price increased by 15.04% in November 2007, the consumer price index (CPI) increased by 2.91% in December, a 16-year record increase. And then, after the A92 price increased by 11.54% in February, the CPI soared by 2.99% in March, a 19-year record high.

In fact, the current petroleum price in Vietnam has already been staying at a high level after the two latest price increases.

While China increased its petroleum price by 18%, the sharpest price increase in the last eight months, its current sale price of US $0.75/litre is still much lower than Vietnam’s price of US $0.87%/litre (at the official exchange rate announced by the State Bank of Vietnam).

And Malaysia, which has an average per capita income seven times higher than Vietnam’s has and decided to increase prices by 40.62%, still has a retail petrol price lower than Vietnam’s ($0.84/litre vs $0.87%/litre).

These figures show that the Vietnamese people still enjoy a low fuel subsidization level from the State. While inflation remains a serious problem, it is necessary to keep petroleum prices stable.
Source: Vietnamnet