Lower crude oil prices to challenge Vietnam’s economy
Lower crude oil prices to challenge Vietnam’s economy
Crude oil prices have plummeted recently, affecting revenue for state coffers, which depend heavily on oil and petroleum exports and imports.
Prices dropped after Saudi Arabia lowered prices of exports to the US and the US oil reserves rose to 2.3 million barrels. International newswires reported that Saudi Arabia was kicking off a battle for larger oil market share.
Economists, who believe the oil prices will continue to fall, have said the price fluctuations would affect Vietnam’s economy.
A report from the Ministry of Finance (MOF) shows that revenue from oil exports and imports make up 26 percent of the state budget revenue in 2000 and 19 percent in 2012.
MOF every year projects revenue from oil and its contribution to the state budget. If the world price is higher than expected, the revenue would be higher, and vice versa.
Meanwhile, in order to obtain projected revenue in the context of oil price fluctuations, Vietnam would have to adjust the targeted exploitation and export volume.
One of the factors influencing the state budget revenue is oil exploitation costs in Vietnam. The Vietnam Oil and Gas Group (PetroVietnam) has never publicized the figures. Some sources said the average cost is $40-50 per barrel. However, the figure has never been verified.
As such, when production costs remain unchanged and the selling prices decrease, the revenue from oil exports will fall.
Vietnam exports crude oil, but it has to import finished petroleum products. The government gains a great deal of revenue from imposing different kinds of taxes on the imports. It is estimated that taxes alone account for a high percentage of petrol prices.
As the crude oil prices fall in the world market, Vietnam will have to slash retail petrol selling prices.
In the latest move, the petrol price has fallen by nearly VND1,000 per liter since November 7 to under the VND20,000 per liter threshold. This was the ninth time in the last several months that petrol distributors have had to lower retail prices.
It is consumers who will be the biggest beneficiaries from the oil and petrol price decreases. The national economy would also benefit because businesses can cut transport fees and production costs. In turn, they can then sell products at lower prices, which could help stimulate domestic demand.
However, Minister of Industry and Trade Vu Huy Hoang has said that the prices of goods and services have been “standing still” despite the sharp drop in petrol price.
The oil price plunge has affected the prices of oil exploitation and distribution companies worldwide. Vietnamese oil and gas firms will also suffer, both in the short and long term.
vietnamnet
