In Resolution 36 dated 6/3, concerning urgent response measures during the conflict in the Middle East, the government approved a more flexible mechanism for managing fuel prices when world prices fluctuate sharply.

Accordingly, if the base price increases by 7% or more compared to the immediately preceding announcement period, price management will be implemented the day after this increase occurs. The Ministry of Industry and Trade, in coordination with the Ministry of Finance, will lead the management and announcement of prices.

If the base price increases by less than 7%, fuel price management will continue to follow current regulations in Decree 80/2023. Under this mechanism, the inter-ministerial team of the Ministry of Industry and Trade and the Ministry of Finance manages prices periodically once every seven days (on thursday). Retail prices may increase, decrease, or remain unchanged if necessary, with new prices effective from 3 PM on the adjustment day.

Based on data for the factors comprising the base price and input from the Ministry of Finance submitted before 12 PM on the adjustment day, the Ministry of Industry and Trade will announce the base price and retail fuel prices.

A gas station attendant prepares to pump fuel for a customer. Photo: VGP

The government issued the resolution as the domestic fuel market experiences strong fluctuations following the escalation of conflict in the Middle East last week. Currently, Qatar has halted liquefied natural gas production, Israel has temporarily closed its gas fields, and Saudi Arabia has shut down its largest oil refinery due to hostilities. Shipping activity through the Strait of Hormuz – a critical chokepoint for global oil flow – is nearly paralyzed, with over 10% of the global container fleet stranded there.

Amid sharp fluctuations in global fuel prices, more flexible domestic price adjustments are expected to reduce delays in management. Currently, retail fuel prices are adjusted once every seven days, while global prices have been fluctuating daily, even hourly, in recent days.

According to a leader of a major wholesale enterprise, when domestic prices fail to keep pace with international developments, importing businesses may incur losses, thereby reducing their incentive to import goods. This could cause private enterprises to hesitate, or even cease imports, leading to a risk of supply shortages. At that point, the market burden would shift to state-owned wholesale traders, creating significant pressure on the supply system.

In 2022, many retail fuel stations temporarily closed due to losses, placing pressure on state-owned enterprises and causing localized imbalances in market supply.

Beyond the retail price management mechanism, the government also agreed to apply the Petroleum Law, requiring oil owners to sell a portion of their crude oil in the Vietnam market, specifically crude oil or condensate not yet under export contract, to meet the needs and technology of domestic refineries.

The government authorized Vietnam National Oil and Gas Group (PVN) and its member units, such as Binh Son Refining and Petrochemical and Petrovietnam Oil Corporation (PVOil), to trade, import, and export crude oil and fuel production materials.

Concurrently, the Ministry of Industry and Trade is tasked with reviewing and proactively implementing measures to ensure supply, promptly reporting to the government on matters exceeding its authority.

The government assigned the Ministry of Finance, the Ministry of Justice, and the Ministry of Industry and Trade to draft a decree amending the most favored nation (MFN) import tariff rates for certain fuel products using a fast-track procedure, to be submitted to the government by 7/3.

Should domestic refineries fail to meet contracted output or if imports face difficulties, the Ministry of Industry and Trade will assess the supply-demand balance and direct wholesale traders to utilize circulating fuel reserves or release national strategic reserves to compensate for market shortages.

The government also called on ministries, sectors, and localities to increase energy conservation and ensure the supply of electricity and fuel in all situations. Concurrently, all parties must finalize standards and regulations for biofuels to promote the transition to environmentally friendly fuels.

Vietnam Electricity (EVN) and PVN are to prioritize maximizing the use of domestic gas for power generation and establish a gas swap mechanism. This aims to reduce reliance on imported LNG and mitigate the risk of fuel shortages for electricity production.

Additionally, ministries, sectors, and localities are required to organize energy-efficient production and consumption, ensuring the supply of electricity and fuel in all situations, as per government directives.

Phuong Dung - Vien Thong