Petrol price cut, could have "given a sigh of relief" with inflation?

	If there was a huge change on petrol prices, it would necessary to temporary halt of deductions from fund to stabilize petrol price
	Preventing “taking advantage” when petrol price increases
	An increase in taxes will not necessarily lead to higher petrol prices

Petrol price has been continuously reduced in order to decrease the pressure on inflation at the end of the year. Photo: Huu Linh.

CPI has cooled down

During the petrol price control session on December 6, the Ministry of Industry and Trade and the Ministry of Finance decided to significantly reduce the domestic petrol price. Accordingly, E5RON92 decreased 1,446 VND/liter, RON95-III reduced 1,513 VND/liter, 0.05S diesel oil decreased 1,379 VND/liter... Thus, after reducing, the price of E5RON92 on the market is 17,181 VND/liter, RON95-III is 18,459 VND/liter, 0.05S diesel is 16,258 VND/liter. This is the fourth consecutive decline since the adjustment on 22/10 and two adjustments on 6th and 22nd respectively. In comparison with the price of the first adjustment in October, the petrol price has dropped dramatically. Previously, on October 6, after being adjusted up, E5 RON92 price was 20,906 VND /liter, RON95-III was 22,347 VND/liter, the 0.05S diesel was 18,611 VND/liter.

The sharp drop in the petrol price in the last few days has partly decreased the pressure on inflation. In fact, the reduction of petrol price has made the CPI for November slow down after consecutive increases from the beginning of the year. As a result, the CPI in November dropped 0.29% compared to the previous month. According to the General Statistics Office, one of the reasons for the decline of the CPI in November is that on November 23, 2018, the average Brent crude oil price in November fell by 17%, the price of Ron 92 gasoline in Singapore decreased by 20% compared to October 2018. The domestic petrol price was adjusted down twice in November 2018. Totally, A95 decreased 2,230 VND/liter, E5 decreased 2,060 VND/liter, and diesel oil decreased 980 VND/liter. Therefore, the average petrol price in November of 2018 decreased 4.1% over the previous month, contributing to reduce the overall CPI by 0.17%.

According to Mr. Le Quoc Phuong, former deputy director of the Industry and Trade Information Center under the Ministry of Industry and Trade, in 2018, the petrol price in the world increased in the beginning of the year. From around September, the price began falling sharply due to many factors and recently, it has fallen to the lowest level since last year to this year. Mr. Phuong stressed that the CPI is dependent on many factors, however, the core CPI is composed of items excluding food, and the petrol prices are very stable. This year, the core CPI of less than 2% is relatively low. Currently, the CPI of Vietnam only depends heavily on the petrol price, and food only fluctuates on the occasion of Tet and weather changes such as rainstorms, diseases. In general, the food price is relatively stable thanks to plentiful supply.

"The petrol price impacts on many sectors, so the CPI has been dependent a lot on it recently. In fact, if the world’s petrol price had continued to rise, it was a great worry that the CPI this year would not meet the target. Fortunately, the petrol price is continuing to decline, so the CPI can achieve the control target of less than 4% due to the sharp drop in price at the end of the year," said Mr. Le Quoc Phuong.

Not many fluctuations in the petrol price in 2019

Mr. Nguyen Van Nam, former director of the Trade Research Institute under the Ministry of Industry and Trade, said that the domestic petrol price reduction was due to objective factors and the reduction of the world’s petrol price. However, Mr. Nguyen Van Nam noted that in the coming time, the petrol price could rise again because Russia and the Organization of Petroleum Exporting Countries (OPEC) have reached an agreement to cut output, around 1.2 million barrels/day, in six months, starting from January 2019. "The domestic petrol price will go up, but only to a certain level. Thus, the inflation target of less than 4% is definitely achievable," said the expert. The experts’ opinions are perfectly well-founded because the average CPI of 11 months in 2018 increased only 3.59% over the same period last year.

Previously, with concerns about the difficulty of controlling inflation in 2018, Mr. Nguyen Bich Lam, Director General of GSO, stressed that the government had flexible and active measures to control inflation below 4%. In particular, for petroleum products, the process was very flexible and the Petrol Stabilization Fund was used reasonably. Therefore, although petrol and oil price increased and affected the CPI, the Government controlled the average CPI in 2018 under 4%.

Regulating petrol prices to ensure publicity and transparency VCN- Representatives of the Ministry of Finance affirmed that petrol price is being implemented under the market ...

Forecasting the situation in the future, according to Mr. Le Quoc Phuong, in 2019, if the world economy flourishes, the demand for petrol increases, so it is likely that the petrol price will increase again. At present, petrol supply is relatively abundant. However, according to forecasts, in 2019 the petrol price will not have many changes. This comes from the fact that the world economy has not shown signs of prosperity. "At the moment, the world economy has not had a breakthrough for national economies to thrive. The US economy is likely to slow down after thriving in the past year. Chinese economy is difficult, nonplussed in the trade war with the United States. The EU economy has escaped from crisis but has not grown fast... ," said Mr. Nguyen Quoc Phuong. According to experts, petrol price will continue to be unknown for macro stability and inflation control. Therefore, the authorities should closely monitor the situation of petrol price in the world, actively raise the supply from the Petrol Price Stabilization Fund, use flexibly measures to regulate petrol and oil price, such as the import tax tool, and decide the spending level of the Petrol Price Stabilization Fund in each operating period in a reasonable and flexible way.