Economists petrol stabilisation fund to be scrapped

It is thought that Viet Nam's prices will strongly fluctuate along with global prices for the foreseeable future as the country's petrol supply could only meet 70 per cent of domestic demand.

People buy gasoline at a petrol station in Ha Noi. The sign says "prices under adjustment period." - VNA/VNS Photo

While a stabilisation fund may suffice in the events of slight increases, it's inadequate in responding to strong fluctuations. To make matters worse, it has proven to hinder bringing down prices as retailers lack incentives to improve sales during periods in which domestic prices are lower than the international market.

With the immediate target of bringing prices back to VND20,000-22,000 per litre to support business activities and keep inflation under control, they urged the Government to scrap the fund. At the same time, it should improve the country's storage to the tune of millions of cubic metres, which may ensure a stable supply for up to half a year at the current consumption rate.

Continuous petrol price surges since the beginning of the year had driven prices up, especially in the key transport industry, said the former head of the General Statistic Office and economist Nguyen Bich Lam.

Lam said during the first six months of 2022, road transport costs increased by 5.94 per cent, waterways by 12.91 per cent, sea routes by 14.28 per cent and airways by 18.32 per cent, which had driven CPI up by 2.44 per cent from the same period last year.

According to industry experts, increased storage was a much better approach to price regulation, especially in light of current global volatile prices. However, a glaring weakness in the country's lack of infrastructure for petrol storage was also a matter that needed to be addressed in any case.

Economists cited several successful models employed by economies around the globe in which strategic commodities such as oil and coal were purchased in large quantities when their prices fell. In the event of price surges, commodities could be used to maintain a stable price level domestically, minimising damage to businesses and the economy.

The method was widely viewed as a proactive and effective way to control petrol prices among international economists.

Experts once again called for the abolishment of special consumption taxes on petrol products. They stressed the importance of bringing prices down below VND20,000 and the tremendous stabilising effect it will bring to business performance and domestic consumption.

In addition, they urged the Government to consider shortening the current price adjustment period from ten to five days to help petrol retailers reduce expenses. Meanwhile, they should also focus on eliminating the middlemen and cutting costs in distributing resources.

In the long run, the country should comprehensively restructure its retail networks and infrastructures.

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