Fuel traders project fuel price stability this year
Fuel traders project fuel price stability this year
The price of fuel in Laos is expected to remain below 11,000 kip per litre this year, according to fuel distributors, thanks to the government's policy to keep the price of the imported commodity low in the interests of macro-economic stability.
“The price of fuel in Laos should in theory increase this year due to increasing demand on world markets, but in fact the price should not rise above 11,000 kip per litre this year,” Lao Petroleum and Gas Group Association Secretary General, Mr Thong Thammalat, said this week.
One of the main reasons, he said, is that it is government policy to keep fuel prices below 10,000 kip for diesel and 11,000 kip for petrol, because fuel price increases threaten to spark inflation in the wider economy which is largely dependent on the import of all manufactured goods.
Officials from the Ministry of Industry and Commerce's Domestic Trade Department confirmed the policy yesterday. They said the price of fuel should stay below 11,000 kip per litre otherwise it will have considerable negative impacts on price stability.
In a reassuring sign though, bus operators and freight service providers have agreed with the government that they will not raise their service charges if the price of fuel remains below 11,000 kip per litre.
The government is aware that rising fuel prices will spur a hike in transport costs and thus the cost of production throughout the country. This would in turn drive up the inflation rate, which will impact disproportionately on the poor.
According to economists at the Lao National Economic Research Institute, the government is in a position to subsidise the price of fuel, as about 30 percent of the current fuel price represents government taxes and charges.
The government can use the buffer provided by the taxes and charges it levies to keep the price of fuel below 11,000 kip per litre, foregoing some revenue so as to keep inflation in check, the economists said.
As of yesterday, diesel was selling for 9,410 kip per litre and regular petrol for 10,600 kip. Meanwhile on the international market, crude oil prices were hovering around US$95 per barrel on Monday. International analysts expect that oil prices on the world market will stabilise this year as the global economy continues to recover slowly.
They say the price will rise depending on demand, adding that the world economic situation including the debt crisis in Europe is resulting in comparatively low demand for fuel on world markets, although demand is beginning to grow.
The current low fuel price on the world market is benefiting Laos as it needs cheap energy to achieve economic growth of at least 8 percent annually.
In 2012 Laos imported about 800 million litres of fuel, up from 750 million litres in 2011. The country spent about US$560 million on imported fuel last year.
vientiane times
