GOVERNMENT INTERVENTION IN GASOLINE CONDITION 1

GOVERNMENT INTERVENTION IN GASOLINE DISTRIBUTION AND RECENT

CONDITIONS IN VIETNAM

Nguyen Tung Khanh

GBS210423_AEG114

University of Greenwich Vietnam

GOVERNMENT INTERVENTION IN GASOLINE CONDITION 2

Table of Contents

Abstract 3

I. INTRODUCTION 4

II. RATIONALE 5

III. IN-DEPTH ANALYSIS 6

1. Current gasoline problems in Vietnam 6

2. Causes of increasing gasoline price in Vietnam 8

3. Government’s solutions and intervening efforts 9

4. Evaluation and Recommendation 10

IV. CONCLUSION 10

V. REFERENCES 11
GOVERNMENT INTERVENTION IN GASOLINE CONDITION 3

Abstract

Apparently, the fuel price is a headache in the world because all fields are relying on fuel to

operate the supply chain being affected immersively, even the travel needs of humans.

Vietnam, in particular, has been experiencing worrisome petroleum shortages. This

study focuses on the present status of fuel prices having increased sharply in the country

and the serious effects that have resulted from it. The fuel price of Vietnam was ranked

74th in the world, leading to a hidden danger for the developing economy. The

Vietnamese government has made an attempt to control the situation at present by

abolishing or curbing taxes, which are not essential because taxes account for

approximately 50% of the price. The price alternation is in progress. Hopefully, the

Vietnamese government can figure out many measures in order to handle this issue,

which is astonishing destruction after COVID-19.

GOVERNMENT INTERVENTION IN GASOLINE CONDITION 4

I. INTRODUCTION
Broadly speaking, gasoline is the most important resource that has served the diverse demands

of humans since it was discovered a century and 60 years ago as it started from crude

oil. For years, gasoline has undeniably been the main key to human society because

there have been various forms of transportation for over a century that consume large

amounts of fuel. With that being said, there have been numerous studies conducted that

stood out how fuel or gasoline has a significant impact on our environment. People are

facing many environmental problems such as the greenhouse effect, lung diseases, and

so on. In recent years, during the outbreak of COVID-19, humans had to be in social

isolation in order to keep a distance from lots of people around us, which led to

facilitating control of the worldwide pandemic, so fuel emissions decreased quickly.

Yet, society is confronted with a big problem: gasoline shortages after the pandemic

has been under control. The current reason is that with the invasion of Russia and

Ukraine, both militaries require huge gallons of fuel in order to run their military

purposes. The EU imposed economic sanctions on Russia as a result, and they banned

all imports of oil from the country. There is a challenge that the world is looking for

positive measures to revive the global economy because the economy has been in a

deep recession from the COVID-19 pandemic period up to now.

According to the energy inventor, Stan Majcher, “Pre-pandemic, in 2019, oil was “a pretty

balanced market”. Global demand was approximately 100.3 million barrels per day,

while supply was approximately 100.6 million barrels, allowing for a 0.3 million barrel

stock build to keep markets operating smoothly. In the United States, the West Texas

Intermediate crude oil price spent the bulk of the year in the mid-$50s per barrel,
GOVERNMENT INTERVENTION IN GASOLINE CONDITION 5

translating to about $2.50 per gallon at the pump. Underlying demand is now predicted

to reach 103 million barrels per day in 2022, owing to 1% yearly global population

growth and more wealth—and demand is expected to expand at a similar rate in the

future, according to Evan, CNBC's correspondent. However, supplies are not keeping

up. According to Majcher, we are already producing approximately 100.6 million

barrels (representing a million barrels lost from Russia), and the resulting price increase

is already limiting demand to approximately 101 million barrels. This is an alarm for

all experts so that they can find out the methods against this problem (CNBC, 2022).

In this case study, it is highlighted that the current situation on gasoline consumption in Vietnam

has some consequences as well as solutions temporarily. Also, there will be a critical

analysis of the Vietnamese government's intervention efforts in gasoline supplies, and

the price will be adjusted as much as possible.

II. RATIONALE
Vietnam is one of the developing countries with a low GDP. In this situation, gasoline in

Vietnam is more expensively exorbitant and accounts for a greater percentage of

income than in the other neighboring countries in Southeast Asia. Given the fact that

gasoline in Vietnam has been imposed with 4 taxes: the special consumption tax,

import tax, value-added tax, and any environmental taxes and fees, there is a strong

upward trend in the prices of gasoline, accounting for 40% of the taxes. Based on the

words of Thu, who is a journalist at VnExpress, in 2022, a liter of fuel will cost roughly

12.7 percent of what a typical Vietnamese earns per day. In other words, this is greater
GOVERNMENT INTERVENTION IN GASOLINE CONDITION 6

than Singapore (1.3%), Thailand, and Indonesia (both 7.5%), but lower than the

Philippines (13.4%), and Cambodia (24.4%). Not only that, but the transport demands

of humans are also rising, for reasons like the supply chain’s purposes, daily activities

(going to work or school) (VnExpress, 2022). Thus, the aim of this research is to

confront the gravity of the recent situation and evaluate the effectiveness of government

action on national gasoline consumption and supplies.

III. IN-DEPTH ANALYSIS

1. Current gasoline problems in Vietnam

For 2 years, the world has been suffering from COVID-19, and the global economy is in

recession. After the pandemic has been under control, there is a “disastrous event” for

humans, which is gasoline problems. In early 2022, according to the Ministry of

Industry and Trade - Finance, the retail price of gasoline in the country is not

determined by the price of crude oil such as Brent or WTI. As a result, the base price

used to compute the retail price is currently based on the price of petroleum products

on the Singapore market (Platt price).

Crude oil must be refined before being sold as a finished petroleum product. Currently, after

refining, each barrel of crude oil (capacity of almost 159 liters) yields approximately

76 liters of gasoline, with the remainder consisting of diesel, kerosene, mazut, and

other petrochemical products. In other words, each barrel of filtered crude oil yields

only half the original volume of gasoline (Vietnam Plus, 2022).

Furthermore, due to political factors, for example, the EU imposed sanctions on fuel

from Russia, or OPEC did not increase productivity as the EU recommended and
GOVERNMENT INTERVENTION IN GASOLINE CONDITION 7

pushed the world price of petroleum products on average over the past 10 days in a

strong uptrend. Nations all over the world are facing fuel shortages.

Illustration: Increasing fuel prices 15 times in the first 2 quarters of 2022 in Vietnam

(PHAP LUAT, 2022).

On June 19, the retail price of gasoline in the country was as follows: E5RON92 gasoline costs

no more than VND 31,117 per liter, an increase of VND 882 per liter over the current

retail price. The price of RON95-III gasoline is not more than 32,375 VND/liter, an

increase of 797 VND/liter over the current retail price. The price of 0.05S diesel oil is

not more than 29,020 VND/liter, an increase of 2,626 VND/liter over the current retail

price. Kerosene costs no more than 27,839 VND/liter, a 2.493% increase above the

current retail price. The price of 180CST 3.5S fuel oil is not more than 20,357 VND/kg,

which is 544 VND/kg less than the current selling price (Bao Tin Tuc, 2022).

Gasoline prices have been altered up to 15 times since the beginning of the year. The price of

RON95 gasoline grew by 8,157 VND/liter, the price of E5 gasoline increased by 7,962

VND/liter, and the price of diesel oil increased by 10,606 VND/liter.

GOVERNMENT INTERVENTION IN GASOLINE CONDITION 8

2. Causes of increasing gasoline price in Vietnam

Gasoline prices are currently at their highest point in eight years. The significant rise in gasoline

costs is also exerting pressure on the economy, as products and services tend to rise in

tandem with gas prices.

Initially, the reason was a supply shortage. Although crude oil prices have climbed by more

than 60% in the last year, hitting $94 a barrel, according to economic expert Dr.

Nguyen Bich Lam, former Director of the General Statistics Office, operators have not

boosted output. The fact that the Organization of the Petroleum Exporting Countries

and its allies (OPEC+) have indicated that it will stick to its plan to raise output in

order to benefit from high prices is a significant factor driving higher oil prices.

increased volume, as needed by major oil-consuming countries like the United States

and India. Moreover, the world is confronting an energy crisis and is bracing for an

early cold and brutal winter in 2021–2022. Therefore, countries are raising their

petroleum reserves, which leads to oil prices rising (VietnamNews, 2022).

Secondly, the cause is the war between Russia and Ukraine. Gasoline prices have increased to

high levels, considerably beyond all previous estimates, in the backdrop of strong

economic acceleration and geopolitical concerns, with the risk of rising further if

conflict breaks out. on the border with Ukraine or the US embargo that stops Russia

from selling crude oil. There are currently no signs that fuel costs will be stabilized

very soon, and the prospect of price reductions is much more remote.
GOVERNMENT INTERVENTION IN GASOLINE CONDITION 9

3. Government’s solutions and intervening efforts

For the first 2 quarters of 2022, the government has altered fuel prices 15 times in order to be

as appropriate as possible. The purpose of this is to support the daily demands of

people living in Vietnam and prevent stagflation so that they can save the economy.

At the Ministry of Industry and Trade's regular press conference this afternoon (June 16),

Deputy Minister Do Thang Hai stated that the Ministry of Finance had a suggestion

about curbing tax and would strive to adopt it as soon as possible. However, in addition

to tax cuts, the Ministry of Industry and Trade stated that other steps, such as boosting

welfare, assisting the underprivileged, and strengthening measures to assist affected

enterprises, are required (Bao Chinh Phu, 2022).

Given the fact that the negative issue is supply scarcity, the Deputy Minister said that domestic

sources will be prioritized, but requires a clear commitment. If the company is unsure

about its output level, it must import to secure supplies.

Besides that, many delegates recently questioned Minister of Finance Ho Duc Phuc about the

issue of gasoline prices and how to cut the price of gasoline during the question-and-

answer session on June 8 at the 3rd session of the National Assembly, the 15th National

Assembly. The Minister of Finance has also provided solutions for this item: The

Ministry of Finance will assess the impact and advise the government, as well as

submit a proposal to the National Assembly Standing Committee and the National

Assembly to decrease the gasoline tax further. However, it should be underlined that,

in addition to this approach, synchronous remedies, including controlling fuel and oil

smuggling and securing supplies, are required (ANTV, 2022).

GOVERNMENT INTERVENTION IN GASOLINE CONDITION 10

4. Evaluation and Recommendation

Although the fuel price has been adjusted appropriately, it can be unstoppable. The government

has been making significant efforts to set a reasonable price because of the ridiculous

one at present. Nevertheless, some alteration times are not feasible, and there is no

result at all. In addition, depending on the low level of GDP of Vietnam, the fuel price

is bounding over the income, which causes some stories about people having to save

money to buy a bunch of gasoline pumps because fuel resources are a necessity in their

lives, especially transportation, which plays an important role as a tool for them to go

to work daily.

In my point of view, the government should diminish some unessential taxes in order to aid

civilians or enterprises so that they do not find difficulties in resources helping for

transportation or supply chain. Due to a part of inflation not only in Vietnam, but the

world economy has been diving into stagflation, this comes down to all prices soaring

up the ladder. Public transportation is the best choice and project that the government

immediately takes action on as soon as possible and builds a good infrastructure

system for this choice.

IV. CONCLUSION

Overall, this research has indicated the alarm about fuel prices and how they have been

impacting the standard of living in Vietnam. Government intervention in this issue has

been obvious to support Vietnam’s people and companies; nonetheless, the constant

fluctuation of fuel prices in the world has not caused a drop in temperature yet. To me,
GOVERNMENT INTERVENTION IN GASOLINE CONDITION 11

the Vietnamese government should take advantage of the natural resources of the

nation so as to sell them domestically instead of exporting them abroad. With the

purpose of reducing the price of fuel imports, which leads to the price being stabilized

but not over the entire Vietnamese economy. More efforts should be made to address

the situation effectively and defend the Vietnamese people's long-term financial

security.

V. REFERENCES

Antv. (2022). Giải pháp nào kiểm soát giá xăng dầu? [online] Available at:

https://www.antv.gov.vn/tin-tuc/kinh-te/giai-phap-nao-kiem-soat-gia-xang-dau-

393796.html.

Bao Chinh Phu (2022). Bộ Công Thương trả lời về các giải pháp kéo giảm giá xăng, dầu. [online]

baochinhphu.vn. Available at: https://baochinhphu.vn/bo-cong-thuong-tra-loi-ve-cac-giai-

phap-keo-giam-gia-xang-dau-102220616184700798.htm. [Accessed 26 Jun. 2022].

Bao Tin Tuc (2022). Giá xăng lập kỷ lục mới, vượt mốc 32.000 đồng/lít. [online] baotintuc.vn.

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donglit-20220613151312285.htm [Accessed 26 Jun. 2022].

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đầu tiên. [online] danviet.vn. Available at: https://danviet.vn/gia-xang-dau-hom-nay-19-6-

cat-dut-chuoi-tang-gia-lien-tuc-gia-dau-giam-tuan-dau-tien-20220619090311148.htm.

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GOVERNMENT INTERVENTION IN GASOLINE CONDITION 12

Evans, K. (2022). Kelly Evans: The energy crisis will keep getting worse. [online] CNBC.

Available at: https://www.cnbc.com/2022/05/27/kelly-evans-the-energy-crisis-will-keep-

getting-worse.html. [Accessed 26 Jun. 2022].

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1044083.ldo?gidzl=mWyIE86XWJp24n8vWhc2EyKG5JsUlOHjsq8MPioyXMpSGn0yaB

oBRTCN7cQIwjziqHTAQsPrdA8pXQU5Fm [Accessed 26 Jun. 2022].

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brake-on-economy-expert.html. [Accessed 26 Jun. 2022].

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trường | Vietnam+ (VietnamPlus). [online] VietnamPlus. Available at:

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4438341.html#:~:text=A%20liter%20of%20gasoline%20costs. [Accessed 26 Jun. 2022].

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gia-dau-tho-the-gioi-giam-
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4462230.html#:~:text=Th%C3%A1ng%203%2C%20c%C3%A1c%20n%C6%B0%E1%B

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Word count: 1942 words

Abstract: 143 words