The impact of gasoline prices has been calculated and forecasted since the beginning of the year

Petrol prices in Vietnam are also lower than the common level of many countries in the region. Photo: N.Thanh

The price is still lower than the world market

Petroleum is an important input fuel of the economy. According to the Law on Price, finished gasoline and oil are on the list of goods and services subject to price stabilization.

Therefore, the continuous increase in domestic gasoline prices in the last five operating periods will increase pressure as well as increase inflation expectations.

According to the analysis of the Price Management Department (Ministry of Finance), on the impact on the consumer price index (CPI), finished petroleum products account for about 3.6%.

Assuming gasoline prices increase by 5%, it will make CPI increase by about 0.18%, while an increase by 10% will increase CPI by 0.36% depending on the increase in petrol price.

Besides that, petroleum also affects transportation sectors such as passenger transport by rail, air, road, waterway, bus, taxi and freight; increase the production cost of goods using petroleum as input for production, thereby leading to an increase in other items in the group of goods and services to calculate CPI.

Regarding the impact on the producer price index (PPI), the increase in gasoline prices will cause an increase in the import price index of petroleum products; increases the producer price index of products using petroleum which accounts for a large proportion of the production cost such as electricity and gas, refined petroleum, etc.

According to the Price Management Department, the global price of finished petroleum products continues to increase, which is the main reason for the increase in input costs, thereby increasing domestic gasoline prices and putting pressure on the management of gasoline prices in particular and the management of prices in general.

Under the pressure of increasing global gasoline prices, coupled with the assessment of supply assurance, market control and strengthening of forecasting, petroleum price management has tried to keep abreast of market developments. At the same time, the Inter-Ministry of Industry, Trade and Finance has flexibly used the Petroleum Price Stabilization Fund to reduce the impact of increasing domestic petroleum prices.

Accordingly, the domestic gasoline price has increased lower than the increase in gasoline price in the world market. Petrol prices in Vietnam are also lower than the common level of many countries in the region as well as the world average (VND28,062/liter).

Strengthen forecasting

According to Mr. Nguyen Anh Tuan, Director of the Price Management Department, the impact of petrol prices has been calculated and forecasted in the price management scenario since the beginning of the year and at periodic meetings of the Price Management Steering Committee of the Prime Minister.

In fact, the increase in gasoline prices can be moderated by several solutions. Decree No. 95/2021/ND-CP stipulates that the domestic petrol and oil selling price is adjusted following the market mechanism and consistent with the world petrol price.

Economic expert Ngo Tri Long said that, as a petrol and oil price management agency, the Ministry of Industry and Trade had closely coordinated with the Ministry of Finance to control domestic prices consistently and complied with the provisions of Decree 95/2021/ND-CP.

The flexible application of solutions had minimized the negative impact of the increase in gasoline prices on people's lives, production and business activities of enterprises, especially in the context of the Covid-19 pandemic.

According to Mr. Ngo Tri Long, the problem is how to reduce gasoline prices, avoiding adverse effects on the economy, which is still "exhausted" due to the Covid-19 pandemic.

Accordingly, there are two tools to regulate gasoline prices, that is through tax and the Price Stabilization Fund. Fund management needs to be flexible because there are times when many key businesses also have negative funds due to overspending.

For tax regulation, it also needs to be calculated and considered because tax reduction will put pressure on revenue collection. On the other hand, in order to reduce tax, it needs to be submitted to the competent authority for consideration, so it is not possible to decide in the immediate future.

The Ministry of Industry and Trade is implementing a number of solutions, such as ensuring supply; strengthening the inspection and control of the petroleum trading market; strictly handling cases of speculation, hoarding or increasing the price unreasonably.

“Regarding price management, the Ministry of Finance will continue to actively coordinate with ministries and sectors as well as actively advise the Price Management Steering Committee on appropriate options to control inflation in accordance with the target. Accordingly, the Ministry continues to closely monitor the world gasoline price movement and forecasting; balancing the use of financial instruments such as the Price Stabilization Fund in a flexible and effective manner in order to limit the sudden increase in price," Mr. Nguyen Anh Tuan said.

Expert Ngo Tri Long also recommended that, when gasoline prices fluctuate, ministries and sectors must also join in.

For example, the role of the Ministry of Industry and Trade - the agency that manages petroleum products, needs to forecast gasoline prices, thereby having a suitable operating scenario, avoiding passivity. Along with that, it is necessary to direct the market surveillance authority to strengthen inspection and examination. The National Steering Committees 389 needs to step in and strengthen the fight against smuggling, trade fraud, and loss of revenue.