Announcement of Research Results “Noteworthy features of Vietnam’s petroleum market and its impact on household welfare”

Đăng vào 26/06/2023

On the morning of June 27, 2023, in Hanoi, within the framework of activities of the Vietnam Alliance for Tax Justice (VATJ), the Vietnam Center for Economic and Strategic Studies (VESS) held a meeting to announce the results of the research “Noteworthy features of Vietnam’s petroleum market and its impact on household well-being”.

Download the Report and Presentation Summary HERE.

Photos of the announcement ceremony were constantly updated HERE.

Opening the program, Assoc. Prof. Dr. Nguyen Duc Thanh, on behalf of the research team, briefly presented the results of the study. The study is expected to present a specific and detailed picture of the Vietnam petroleum market, as well as the issues of taxes on petroleum products and the factors that are affecting the current retail petroleum prices. At the same time, evaluate how spending on petroleum affects households in Vietnam and the direct impact of the increase in petroleum prices on household well-being through spending on petroleum based on a piecemeal approach. Policy recommendations could be made to ensure fairness in accessing resources, especially for the poor.

The research results also showed that, if the average household spending on petroleum increased, the per capita well-being of the household would decrease. The implication was that cutting spending on petroleum would help improve the per capita well-being of households. Estimating the impact on wellbeing by 5 income groups, when increasing spending on petrol, the average wellbeing of poor households would decrease. The same phenomenon occurs for the wealthy and the upper-middle classes. According to the research team, this indicated that the reform in the petroleum market could help the market operate more efficiently, resulting in lower and more stable prices, which can help increase multidimensional household well-being in Vietnam in the long term.

According to research by VESS, controlling petroleum prices at a reasonable level could help cut down on household spending on petroleum in the context that the number of households and the amount of petroleum consumed by households tend to increase; Creating an efficient petroleum market, creating a lower and more stable price level would help increase the welfare of Vietnamese households in the long term.

Given that the policies on the petroleum market currently have many shortcomings, Ms. Nguyen Thi Bich Huong, Chairwoman of the Petroleum Association, the Vietnam Association of Small and Medium Enterprises cited, from 2022 to now, the Government had requests to amend Decree 83 and Decree 95 but that have not been approved so far. Meanwhile, the petroleum market is very much looking forward to these decrees being quickly approved, promptly overcoming inadequacies, helping the petroleum market to stabilize, and supporting enterprises to develop and overcome difficult times. Ms. Huong also expressed her opinion on the current tax calculation method for petroleum products in the form of “tax-on-tax”. Therefore, the Government needs to compare many issues when comparing petroleum prices in Vietnam with petroleum prices in many countries and regions. Thereby, stabilizing petroleum production and business activities, ensuring compliance with the general price level.

Mr. Bui Ngoc Bao, Chairman of the Vietnam Petroleum Association (VINPA) agreed and said that the retail price of petroleum should be decided by the market. According to him, this was a price-stabilizing commodity, according to the Law on Prices. When the market fluctuates, adversely affecting the economy, the Government would intervene with stabilizing tools and measures. Otherwise, under normal conditions, the price should be left to follow the market. Not to mention, domestic prices have been closely influenced by the world, although 70% of the supply is from two domestic refineries. “Because the input materials of these two refineries also follow world prices,” said Mr. Bao.

Mr. Pham Ngoc Hung, an expert in the field of petroleum, also agreed with the proposal to establish a petroleum exchange. He emphasized that the current Decree on petroleum trading had many limitations, especially in business policy, affecting the profits of enterprises and petrol prices in recent times. Mr. Hung questioned why not set up a petroleum exchange. According to Mr. Hung, it would bring publicity and transparency in prices, avoiding bias and monopoly, and at the same time increasing the national petroleum reserve for companies that had warehouses.

More pictures from the meeting: