A competitive petrol market still far away
Petrol distributors ‘playing defence’
The head of the business division of a southern region petrol company said that it is very difficult to trade petroleum nowadays because the Government’s policies are as changeable as the weather. “The ministry tells us that we are bad at trading and that we ought to have imported petrol when the prices were good,” he said. “However, things were not so easy.”
“It happened that we imported petrol when the price was low and we believed that we could make profit on these import deals. However, two weeks later, just as a tanker with our consignment reached port, the Government unexpectedly raised the petrol tariff. As the result, our import deal turned out to bring us a loss.”
As though sharing a confidence, the oil company executive continued: “In the petrol business, there is only one thing that’s true, the import price. But who can say what tomorrow’s petrol price will be?”
An executive of Petrolimex said flatly: “We cannot take the initiative in our decisions to raise or reduce prices”
For example, Petrolimex and other petrol distributors have been urged to slash sale prices when the world prices are going down. However, before they take an initiative on prices, the distributors want to know if the Government will raise the tariff or require them to contribute mỏe to the petrol price stabilization fund.
Currently, petrol distributors must pay 37 to 42 percent of the price of one litre to the state budget.
The Petrolimex officer s aid that the current petrol price management scheme prompts enterprises to reduce the volume of imports or reduce the volume of sales when they take a loss, rather than sell products at prices lower than the import price.
The one-price market
The idea of building competition among Vietnam’s petrol retailers was mentioned for the first time six years ago. In that year, a Government directive introduced a bit of market flexibility by allowing enterprises to adjust the retail petrol price by 10 percent at maximum and adjust the price of oil products by five percent.
Then, in 2007, Government Decision No 55 gave petrol companies the right to define the retail prices. However, talking to VietNamNet, the petrol distributors are unanimous that this right is theoretical. “We have never yet had a competitive petrol market. The State still decides everything.”
The well known independent economist Nguyen Quang A says that though Vietnam has eleven petrol retailers, Vietnam still does not have a competitive petroleum market in the true sense of the word.
Dr. A says that though the eleven distributors have eleven different business mechanisms and eleven different cost structures, they are all selling products at the same price at every one of the nation’s petrol retail points. That price is the ceiling price set up by the state.
Petrolimex is now holds a 57 percent market share, A continued, while the other ten enterprises divide 43 percent. Thus Petrolimex is the market leader, and all other distributors have to follow the lead of ‘eldest brother’.
Deputy Minister of Finance Tran Van Hieu told VietNamNet “don’t hope for a competitive petrol market like in other countries. For now, Vietnam is still in a transitional period and we all have to bear the ‘pain’.
