Local and foreign experts attended a roundtable yesterday hosted by the Vietnam Investment Review (VIR) to discuss the impact of oil price fluctuations on Viet Nam's economy and the various measures to maintain stable and sustainable growth.

The editor-in-chief of the VIR, Le Trong Minh, said oil prices have soared to heights above all prior forecasts due to robust economic expansion and geopolitical uncertainty. Even though fuel costs are presently considerably lower, there is no indication that they will soon normalise.

Minh said the possibility of a price hike remains. Governments are expanding their petroleum stockpiles as the world is undergoing an energy crisis and Europe is preparing for a tough winter, increasing the likelihood that oil prices will continue to rise. Meanwhile, oil prices in Viet Nam are heavily influenced by global prices as the current petroleum supply is insufficient to meet local demand.

Due to the high cost of manufacturing and delivering products and services, the recent swings in fuel prices continue to significantly influence the income, expenditures, and lifestyles of individuals and enterprises, resulting in an increase in CPI.

The roundtable was convened to understand better how oscillations in fuel prices influence the domestic economy and effective strategies to cope with these fluctuations to achieve stable and sustained growth.

Support material price

As a consultant to the Ministry of Planning and Investment for policies on supporting businesses nationwide, Luong Van Khoi, deputy director of the National Center for Socio-Economic Information and Forecasting, assessed the current circumstances of operational processes impacted by oil price volatility and advised the government on developing policies to assist businesses in overcoming obstacles resulting from oil price fluctuations.

Khoi cited the macroeconomic report in the first eight months of 2022, showing that the country's macroeconomics were stable, inflation well controlled, and major economic balances ensured.

"August's CPI increased by 3.6 per cent over the same period last year, and there was a slight decrease in the prices of food, foodstuffs, and construction materials," Khoi said.

"The country not only ensures a sufficient supply of electricity and gasoline, but it also immediately orders inspections and punishes petrol and oil retail businesses that break the law. A proactive operation plan is formulated to create more room for the support of gasoline prices as necessary."

Le Tuan Anh, director general of the Department of Industrial Economy, said: "The Government has implemented many policies and solutions to stabilise the macro-economy and support businesses, which have achieved some good results. However, to adapt to the rising cost of gasoline and oil, businesses should not only adjust the selling prices of some products but also apply several solutions like making the most of available resources and maximising material savings to reduce costs."

According to Tuan Anh, other solutions include improving management, monitoring production and business processes closely, and limiting losses. Businesses should also negotiate with transport providers to avoid a significant increase in the freight rate.

"They should look for new suppliers of other materials to secure good materials with the least price fluctuations," said Tuan. "More investment should be made in upgrading production lines to improve the working environment and increase productivity to limit rising product costs."

At the seminar, economic experts from organisations and associations and several local and foreign business representatives shared their insights into the energy crisis and the impact of oil price changes on socio-economic development. The speakers offered many solutions and suggestions to overcome immediate difficulties and stabilise production and business activities in the direction of sustainable development. The proposals aim to contribute to a green energy transition to strengthen Viet Nam's energy security.

In particular, Phan Duc Hieu, Standing Member of the Economic Committee of the National Assembly, discussed the impact of fuel prices on the business operations of the general economy and the business sector, as well as initiatives for governmental policies to encourage and assist economic activity.

Hieu said: "Petroleum is regarded as an international business with several risk factors; international practices should be considered. The amended Law on Petroleum Law only covers the exploration and production of upstream oil and gas. Meanwhile, midstream and downstream oil and gas activities like petrochemical refining, fertiliser production, and electricity generation are governed by other laws."

According to Hieu, the market context and conditions in Viet Nam show that it is necessary to synchronise petroleum law with other laws. For example, the construction of a gas pipeline is governed by several other laws. Therefore, the draft amended law provisions should facilitate the implementation of oil and gas exploration and exploitation projects in series. This will help avoid legal conflicts and the cumbersome application process of submitting documents to many agencies and ministries.

Meanwhile, Kenya Maeda, principal executive officer of Crude Oil Trading & Supply, Global Markets, Idemitsu Kosan Co., Ltd., discussed the importance of supply chains and their characteristics in the petroleum sector, including the global price trend of fuel products, especially in Asia.

Maeda said: "Global crude oil demand in the medium and long term is expected to increase. However, based on the expansion or closure plans from refineries in the Asian region, we predict that the medium and long-term supply of fuel products will not satisfy the increased demand. Therefore, in order to maintain a stable supply of fuel products concerning the national energy security (even in a market without a stable outlook in the future), it is necessary to promote the entire/robust supply chain for fuel products from purchasing input materials and production to sales and consumption."

On top of the pandemic impacts, another new issue, excessive pricing, is impacting the transportation industry's functioning inside the logistics system. Petrol expenses currently account for more than 30 per cent of the overall logistics cost. — VNS