Fuel prices uncut as traders still face losses

Fuel prices have yet to be cut in the face of sinking global value as petroleum product traders are still in the red repaying the government for their 2007-2008 bailout package.

Traders are now sustaining losses of VND179 (1 US cents) per liter of gasoline sold, said Deputy Minister of Finance Tran Van Hieu at a press briefing in Hanoi Wednesday.

The losses, calculated on the average import prices over the first 14 days of July, are due to import taxes of 20 percent plus VND2,000 the traders must repay to the government on each liter sold.

VND1,000 per liter goes to repay the ministry for some VND4.03 trillion (US$226 million) it advanced fuel traders to cover losses of VND4.04 trillion ($227 million) they incurred when prices sunk in 2007-2008.

Traders must also pay another VND1,000 from every liter sold into a fund established to subsidize any losses they might incur if the government keeps a low cap on retail prices when global prices rise.

“Prices of petroleum products in Vietnam are now lower than those in some countries in the region,” said Hieu, adding that the popular 92- octane gasoline is now priced at VND14,200 ($0.79) per liter in Vietnam, compared with VND16,396 in China, VND19,847 in Singapore, VND16,686 in Laos, and VND 15,844 in Cambodia.

Forecast
Hieu said local traders were only required to lower retail prices after global prices drop for 20 consecutive days. World prices have dropped for 14 days so far.

He also said import taxes on petroleum products would remain unchanged.

The ministry would only consider cutting retail fuel costs if firms began earning profits again after paying the government debt and contributing to the fund.

To date, the firms have repaid only 38 percent of the bailout money.

Nguyen Tien Thoa, head of the ministry’s Price Management Department, said the country’s first oil refinery, Dung Quat, is expected to meet only some 30 percent of local demand in 1-2 years, so petroleum costs in the domestic market would still depend on the import prices.

One year ago, oil prices had struck record peaks above $147 – but they have since collapsed in line with slumping energy demand. Over the past 12 months, prices have nosedived, striking $32 in December before clawing back some ground on economic recovery hopes, AFP reported Wednesday.

World average prices of petroleum products in the last 14 days decreased between 0.8-8.6 percent over those in June, according to the Ministry of Finance.

The 92-octane gasoline fell to $69.7 per barrel in the first half of July from $75.38 per barrel in June, while kerosene and diesel dropped respectively to $71.64 per barrel from $75.66 per barrel, and to $71.33 per barrel from $76.99 per barrel.

Vietnam imported 5.9 million tons of petroleum products worth nearly $3 billion in the first half of this year. The figures amounted to respective declines of 3.6 percent and 54.2 percent year-on-year, according to the General Statistics Office.

Reported by Ngan Anh