Gasoline price insurance: Necessity, but clear regulation

Mr. Bui Ngoc Bao, Chairman of Vietnam Petroleum Association

However, according to Mr. Bui Ngoc Bao, Chairman of the Vietnam Petroleum Association, there should be clear regulations that are put into law so that enterprises can use this tool.

The petroleum market has witnessed many fluctuations, how does this affect Vietnam when our country imports a lot of these products, sir?

Vietnam's economy is deeply integrated and has a large openness, so fluctuations in world gasoline prices have a direct impact on Vietnam's petroleum market.

The first quarter of 2022 recorded very special fluctuations due to geopolitical factors plus issues around the pandemic. The highest instability is the movement of petroleum prices in the world at a very large amplitude, even up to 5-6% during the day.

Specifically, in March 2022, the price fluctuation range was up to 18-20%. This has a negative impact on Vietnam's petroleum production and trading. Quarter 1 is a special quarter that needs to be carefully evaluated to come up with a stable scenario for petroleum production and trading.

What do you think about the response measures of the state management agencies to ensure supply and stabilize petrol prices?

Before the fluctuations in gasoline prices, the Government, the Ministry of Finance, the Ministry of Industry and Trade and other management agencies immediately gave instructions. Vietnam has used all tools, from the issue of assigning import business plans to ensure the supply to the maximum use of funds, even with a flexible proposal for taxes, including environmental taxes, to prevent negative effects on the economy.

However, Vietnam is not an oasis, so gasoline prices in the first quarter of 2022 must increase. The basic thing is that Vietnam can ensure supply without interruption to serve economic recovery after the Covid-19 pandemic.

Regarding price fluctuations, the assessment is that oil prices will continue to remain high and have unpredictable fluctuations.

The Government and relevant ministries have flexibly responded to help ensure supply and stabilize petrol prices. From the perspective of businesses, what should be done to be able to proactively reduce risks in the context that gasoline prices are still complicated and difficult to predict?

With changes and price fluctuations, businesses need to pay more attention to operations and tools to ensure price risk.

In fact, Vietnam's petrol and oil businesses do not directly do derivatives and price prevention measures. There may be reasons related to the legal basis. However, with the current changing prices, businesses need to pay more attention, more directly to the measures to prevent price risks. Enterprises using petroleum such as transport enterprises and aviation enterprises also need to pay attention to this issue.

Price hedging is a high-class profession, used a lot around the world, but it is still limit ed in Vietnam, so it requires a thorough research assessment through a reputable consulting company to get acquainted. In addition, in Vietnam, there is no clear legal framework on this issue; although it is mentioned in Decree 83/2014/ND-CP on petroleum trading, it is not clear what to do.

Currently, in our country, there is no uniform regulation. For enterprises, these costs are being recorded in financial investment while price insurance is part of the petroleum business; therefore, it is not possible to separate which is the petroleum business and which is the financial investment. In order for enterprises to use the price insurance tool, it is necessary to have clear regulations and put them into law.