Finding solutions to adapt to the increasing prices of gasoline and oil

Production and business activities of enterprises faced many difficulties when gasoline and oil prices continuously increased. Photo T.D

Struggling with increased prices of gasoline and oil

The high price of gasoline and oil has had a great impact on the operating costs of enterprises, especially in the field of transportation and logistics, at a time when enterprises have just started to resume production and business after the Covid-19 pandemic.

According to Chairman of Binh Duong Export Association Pham Van Xo, the sudden increase in gasoline prices greatly affected enterprises in general and the transportation system with logistics activities. Previously, each container cost more than US$5,000, but now it has increased by more than US$10,000 per container. The continuous price increase puts great pressure on the transportation and logistics industry, forcing enterprises to cut costs to adapt and survive.

Meanwhile, Mr. Tran Duc Nghia, director of Delta International Company, a logistics unit, said that in road transport, 40% of freight charges were fuel costs, the increased adjustment of petrol prices in a short time had caused a 13% rise in the cost structure of enterprises. This problem had been strongly affecting enterprises when the cost of road transport was estimated to increase by 4-5%.

According to Mr. Nghia, in the immediate future, enterprises did not have any measures to deal with the sudden increase in gasoline costs like today. Enterprises would also try to cut costs but still, it was very difficult. Enterprises would have to find ways to negotiate with customers to adjust fees and transport prices to match gasoline prices. It was not easy to adjust the freight rate, this adjustment was not immediate because the price was already specified in the contract.

Ngo Tung Bao, Director of Ngoc An Logistics Joint Stock Company, said that after two increases in petrol and oil prices on February 21 and March 1, transport enterprises were forced to increase their prices by 10-15% of charges on average to compensate for the increase in petrol and oil prices. With the new adjustment, freight rates increased compared to the old rates. For example, the fee for transporting containers from Cat Lai port (HCMC) to My Phuoc Industrial Park (Binh Duong) at VND3 million increased from VND200,000 to VND300,000 at present.

For the freight of containers from Ho Chi Minh City to Quy Nhon (Binh Dinh) increased by VND1.5-2 million per time, from Ho Chi Minh City to Can Tho also increased by VND1 million per time compared to before.

In addition, according to some enterprises, in the context of price pressure, the export price of Vietnamese agricultural products will face a disadvantage in competing in the international arena.

Currently, enterprises are renegotiating prices with foreign partners, but it is not easy to convince partners to increase prices in a short time. Therefore, most enterprises are now hesitant to receive new export orders, only maintaining old orders. Therefore, agricultural products and goods are likely to be redundant in the future. This makes it more difficult for enterprises, affecting the progress of recovery and import and export in 2022.

Striving to adapt

Mr. Nguyen Van Be, Chairman of the Association of Industrial Park Enterprises in Ho Chi Minh City, said that most manufacturing enterprises in Ho Chi Minh City were negatively affected by the increase in fuel prices. Therefore, the State should soon apply measures to reduce taxes and fees with a reduction of over 50% or even more to limit  an increase of fuel prices beyond the tolerance of enterprises and the economy. It was necessary to recognize the positive side of these policies, which was to handle the increase in gasoline prices, contributing to limit ing inflation, and promote production and consumption to create new sources of revenue.

Mr. Nguyen Dang Hien, General Director of Tan Quang Minh Trading and Production Company Limited (Bidrico), said that after the price of gasoline increased on March 1, the company received notices of increasing transportation prices of most of the customers.

Although it was impossible to complain to the partner because gasoline had increased six times in a row according to the world crude oil price, the company must also negotiate to reduce 1-2% on the price increase proposed by the partner in order to reduce pressure on manufacturing.

In fact, the manufacturing enterprises are facing a lot of difficulties and great pressure on costs when the price of input materials is high, the cost of production and circulation of goods has increased while consumption power has not recovered. On the other hand, the increase in gasoline prices leads to an increase in the prices of goods and services, while people's incomes are still low. Enterprises have also increased wages by 7-10% for employees, but “have not assisted” in the current price slippage.

Ms. Ly Kim Chi, Chairman of the Food Association of Ho Chi Minh City, said that many imported raw materials had increased their prices by 30% to 35%, while domestic raw materials had also increased by 10%-15%.

Meanwhile, gasoline and oil prices have risen to record levels and show no sign of stopping, it was forecast that the price of domestic and imported input materials would tend to increase. Facing the above situation, many food production enterprises in Ho Chi Minh City were looking for ways to reduce transportation costs by coordinating with distributors. Previously, a large order could take 2-3 trips, but now enterprises were trying to gather in one trip or even one trip would go to many distributors.

However, according to Ms. Ly Kim Chi, in order not to increase product prices too much, manufacturers wanted distributors to share difficulties and the Government had solutions for gasoline prices.

The Government had to direct the Ministry of Industry and Trade to best manage gasoline prices, for example, how to release the Petroleum Price Stabilization Fund, how many days should the price be updated, which enterprises took a period of fixed time to stabilize production.

Because if the price of gasoline increased continuously, it would make it difficult for enterprises in all fields. For enterprises producing directly, enterprises producing and trading essential goods, it was time that this difficulty was calculated in the cost of products and of course would affect consumers.