Petroleum shortage – need to review business management process

People are waiting in line to buy gasoline in HCM City. Photo: Thu Dịu

Ensure adequate supply of petrol

In recent days, in some southern provinces and cities such as HCM City, Binh Duong, and Binh Phuoc, the shortage of gasoline and oil at petrol retailers has taken place seriously, leading to the situation of people waiting in line. EAs a result, even many retailers had to

However, the Ministry of Industry and Trade affirmed that the total domestic petroleum supply was insufficient or even redundant. Nghi Son and Binh Son oil refineries are committed to supplying enough gasoline and oil with an expected output of 3.9 million m3 in the third quarter (accounting for 72% of the total demand) and 4.4 million m3 in the fourth quarter (accounting for 80% of total demand).

Regarding import sources, according to statistics of the General Department of Vietnam Customs, by the end of the first 9 months of 2022, Vietnam imported more than 6.5 million tons of petroleum products of all kinds, with a turnover of more than US$6.8 billion, an increase of over 22.7% in volume and more than 131% in value.

Thus, the total gasoline supply, including domestic production and imported sources, is abundant compared to the previous year. Therefore, there is no shortage of gasoline from major hubs and traders.

The scarcity of gasoline does not come from a lack of supply. According to the analysis of Prof. Le Ba Chi Nhan, an economic expert, the main reason is the sharp increase in business costs and the wholesale traders do not have enough goods, so they only maintain the system and inventory following the regulations. Many businesses sharply reduce discounts to limit retailers from taking a lot of goods, so retail businesses make a loss. Faced with this situation, it is necessary to review the petrol and oil business management process that the Ministry of Industry and Trade is in charge of solving this problem. Accordingly, the Ministry of Industry and Trade must balance the import price and all input costs to maintain the common price level in the market. If it cannot be resolved, it must be submitted to the Government and then submitted to the National Assembly for discussion on implementation plans.

"Regarding the issue of stabilizing the petrol and oil market, the Ministry of Industry and Trade is the unit directly managing. So in the coming time, it is necessary to make specific decisions soon, including solutions to solve problems about costs for businesses, distributors and retailers such as; cost of premises, labor costs, warranty, and transportation. Besides that, it needs solutions to ensure the supply, and avoid the shortage of petroleum as in the past. However, to ensure a stable petroleum market and minimize gasoline shortages, it requires many other units to participate in researching policies and operating gasoline, ensure the supply and offer appropriate profit levels. to support businesses and agents to resume operations," Mr. Nhan said.

Economist Ngo Tri Long also said it was necessary to calculate and build a gasoline distribution system in a streamlined, flexible and efficient way and reduce intermediary costs. In particular, the Ministry of Industry and Trade needed to continue directing petroleum wholesalers to actively seek sources of goods with good prices and reduce costs. The Ministry of Industry and Trade also needs to strengthen the management of goods supply, distribution and circulation; market surveillance agencies must strengthen inspection and examination of the observance of the provisions of law; enterprises need to improve management capacity, save costs and be able to share profits; people share with the State through efficient consumption, use of mineral gasoline, bio-fuel to protect the environment.

The normed expenses are close to reality

According to the provisions of Decree No. 95/2021/ND-CP dated November 1, 2021, of the Government amending and supplementing several articles of Decree No. 83/2014/ND-CP on petrol and oil trading, base price is calculated based on four factors including world price of petroleum products; normative expenses and profits; the level of setting up and spending for the use of the petrol and oil price stabilization fund; taxes.

According to the Ministry of Finance, the normative cost to calculate the base price of gasoline accounts for about 9.29 - 10.51% of gasoline and about 5.92% of diesel (calculated at the operating period on September 21, 2022), including the cost of transporting gasoline from abroad to Vietnam, premium (price adjustment factor in petrol and oil trading contracts) in the country; the cost of bringing petroleum from the refinery to the port; rated business expenses. The standard profit for calculating the base price of petroleum accounts for about 1.33 - 1.38%.

The above normative expenses are reviewed and determined based on the actual developments of petroleum business activities, ensuring the principle of correct calculation, sufficient calculation, reasonableness, validity and conformity with the common ground of key traders. Accordingly, key traders periodically report business expenses following regulations to the Ministry of Finance. On that basis, the Ministry of Finance will summarize, review and evaluate.

According to Finance Minister Ho Duc Phoc, about the standard cost for petrol and oil trading, the regulation for one litre of gasoline like A92 is VND 975. After receiving the Ministry of Industry and Trade proposal, the Ministry of Finance consulted ministries, sectors and businesses and agreed to increase it by VND350. Thus, the standard cost for one liter of A92 gasoline is currently VND 1,320. As for other petroleum products, in an official dispatch sent to the Ministry of Industry and Trade regarding the cost of petrol and oil, the Ministry of Finance announced: the domestic premium for A95 gasoline is VND1,340 /liter, 0. 05S diesel oil is VND30 /liter. The cost of transporting gasoline from the domestic refinery to the port for E5 gasoline is VND 290 /liter, A95 gasoline is VND 280 /liter, and 0.05S diesel is VND240 /liter.

"On the side of the Ministry of Finance, we always support creating favorable conditions for businesses, especially distribution businesses and retail businesses, to ensure the source of petroleum to serve the people and ensure low gasoline prices to promote production and business and improve people's lives. Therefore, we have advised accurately on policies to respond to the increase in gasoline prices," Minister Ho Duc Phoc said.

In the future, the Ministry of Finance will continue to coordinate with the Ministry of Industry and Trade in reviewing and evaluating the normative cost elements in the base price to ensure the harmony of interests between the people, the State and enterprises. Taking into account the target of controlling inflation by following the target set by the Government.