The Ministries of Finance and Industry and Trade this morning July 15 organised a press conference, explaining why the world’s fuel prices have been continuously decreasing but domestic prices remaining the same.

Deputy Minister of Finance Tran Van Hieu said at the press conference that in the last 14 days, the world’s prices have dropped by 0.8-8.6 percent over the average price in June. However, the biggest price decreases have been seen with crude oil, while no considerable price decrease has been seen with finished products. A92 petrol is now trading at $69.71 per barrel in Singapore, kerosene at $71.64 per barrel, diesel $71.33 and crude oil at $63.79.

According to the two ministries, with such import prices and domestic sale prices, petrol importers are incurring the loss of 179 dong after tax and other expenses for every litre of petrol sold. Meanwhile, they are earning the profit of 136-750 per litre of diesel and kerosene sold.

Deputy Minister Hieu said that though the petroleum pricing has been going in accordance with the market rules since July 1, 2007, enterprises still have to fulfill the task of stabilising the petrol prices as per request of the Government. This led to the losses of 4,040 billion dong in 2007 and 2008. The Ministry of Finance lent 4,038 billion dong to enterprises, and to date, the enterprises have just paid back 38 percent of the sum of money to the state budget.

Hieu said that in the immediate time, the domestic retail prices of petroleum will remain at 14,200 dong per litre of A92 petrol and 14,700 per litre of A95. Kerosene will stay at 13,650 dong, mazut 10,500 dong and diesel 12,100 dong.

Recently, more than 5000 cubic metres of A92 petrol were churned out by Dung Quat oil refinery. However, Hieu said that the output from Dung Quat just can meet 10 percent of domestic demand, while Vietnam is still relying on imports. Therefore, petrol prices cannot be slashed. Even if domestic production could meet 30 percent of domestic demand, one should not expect that this would force domestic prices down.

“The principle is that we must follow market rules and that enterprises must not sell cheap if they have to buy high,” Hieu said.

Regarding the amendment of Decree 55 on regulating the petroleum market, Hieu said that concerned agencies are considering giving businesses more power in defining retail prices.

“The decree will be amended to make it more suitable to Vietnam’s conditions, while we should not expect that prices will be regulated under the mode being applied in the US or UK, as we still are relying on imports,” Hieu said.

In related news, Petrolimex, a petrol importer which is now holding more than 60 percent of the market share, has announced the profit of 200 billion dong for the first six months of the year.

Vu Ngoc Hai, Chairman of Petrolimex, told VietNamNet this morning that 200 billion dong is the profit for the first half of the year after it paid tax for petroleum trade (domestic consumption and re-export). The figure would be 500 billion dong if Petrolimex did not pay tax and fulfill other financial duties.

The news has sparked the anger of people who have been told that petrol importers have incurred losses because they have been forced to sell petrol at low prices to stabilise the market.

“The information has not actually surprised me. Enterprises always complain that they incur losses and ask for price increases. However, in fact, they have been making profit,” said Nguyen Minh Phong from the Hanoi Socio-Economic Research Institute.

Source: VietNamNet/VNE