Ministry won't cut petrol price despite cheaper oil

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The last increase in domestic fuel prices took place on March 29 when the retail petrol price rose by VND2,000 (nearly $0.1) to VND21,300 ($1.03) per litre. The price has remained unchanged since.

A meeting in Ho Chi Minh City last week heard that hundreds of gallons of petrol was being illegally imported across the Vietnam - Cambodia borderline everyday.

The domestic petrol price is about VND2,000 to VND2,500 per litre higher than in Cambodia, Thailand and Malaysia, which has encouraged smuggling, according to An Giang Market Watch Department.

Nguyen Tien Thoa, director of the Price Management Department under the MoF, also said there would be no immediate change in petrol prices.

"Vietnam has not imported crude oil so world prices of crude oil should not affect local prices," he said, adding that the trade should be in compliance with the Government Decree 84.

The decree permits businesses to adjust petrol prices by up to 7 per cent when the world petrol prices fluctuates by at least that amount in 30 consecutive days. When the global oil price was rising and falling by between 7 per cent and 12 per cent, enterprises were allowed to hike prices by 60 per cent of the increase, with the remaining 40 per cent being offset by import tax adjustments and the fuel stabilisation fund.

The basic petrol price must be based on the average price over the last 30 days, Thoa added.

The average price of A92 from July 9 to Aug 8 was $123.88 per barrel, while diesel was $131.04 and kerosene, $130.52.

Distributors have been selling petrol at VND 21,300 per litre, lower than the computed basic price of $123.88 per barrel.

In the past month, Thoa said the price stabilisation fund, along with import tax adjustments, had helped to keep domestic prices stable.

Meanwhile, the world crude oil price has declined by 10.5 per cent since the beginning of last month. Last week alone, the crude oil price dropped by 9.2 per cent as investors bartered the commodity away, anticipating another recession that would restrain demand.

The global crude oil declined to $78 per barrel yesterday after the US's credit rating was downgraded by Standard & Poor's.

In comparison with March, the global crude oil price declined by $20 a barrel.

Experts said that as the US economy continued to face difficulties, crude oil prices would continue to decline.

US-based Merrill Lynch earlier forecast that the crude oil price could fall to $50 a barrel this year.