Petrol prices fire up fierce debate

Consumers want price consistency when they drive up to the pump

The Ministry of Finance (MoF) last week decided to establish three teams to inspect the petrol and oil import product prices of Petrolimex, PV Oil, Saigon Petrol and Dong Thap province-based Petimex.

Petrolimex is the country’s largest fuel importer and retailer with a 60 per cent market share.

“This move is completely reasonable and necessary to manage this essential commodity more effectively,” said Vu Dinh Anh, former head of the MoF’s Institute for Market and Prices.

The inspection teams will look into the distributors’ inventory fuel prices from August 26, 2011 and imported fuel prices from January 1, 2011 to September 15, 2011.

Fuel trading activities and related expenses will be clarified and the MoF will examine the use of the Petroleum Price Stabilisation Fund from January 1, 2011 up to September 15, 2011.

News of the inspection follows arguments at a meeting last week between leaders of the MoF and Ministry of Industry and Trade (MoIT) on the management of petrol and oil prices.

According to Petrolimex’s general director Bui Ngoc Bao, this year ended August 31 Petrolimex mounted up losses of VND1.8 trillion ($87 million). The company expected to lose VND200 billion ($9.7 million) in September, which would increase total losses for the year to around $97 million.

Bao suggested that the MoF compensate petroleum firms for their losses, because they had joined the government’s petrol price stabilisation programme.

However, MoF Minister Vuong Dinh Hue disagreed with this proposal, citing there had been several cases where oil companies had falsely reported losses while making profits.

“When the MoF required a gasoline price cut of VND500  per litre in late August this year, Petrolimex was making a profit of VND780 per litre but still complained it was losing money. The whole thing was fake,” he said.

Anh said that these conflicting arguments were the consequence of a lack of transparency in petroleum price management. “Currently, information about petroleum traders’ profits or losses is published by enterprises themselves which will be the basis for them to propose to increase petrol prices, or suggest the MoF compensate for losses, or recommend an import tax reduction. However, there is no one to confirm how true that information is,” said Anh.

Regarding the petroleum fund, Anh said it should be removed because it did not address key problems.

“If the fund is maintained, a new financial management mechanism is necessary,” Anh argued.

Also at the meeting last week, Deputy MoIT Minister Nguyen Cam Tu said the MoF’s petrol price management was based solely on public opinion and did not take into account the need for a stable petroleum supply. “The recent regulations on petrol prices were a combination of a market and subsidy mechanism. The MoF did not define its goal of ensuring national energy security or subsidising petrol prices,” Tu said.

Meanwhile, Hue said a price rise could further drive up inflation.