Is the petrol price stabilization fund still necessary to regulate the market?

As a tool of the Government for decades to ensure stable oil prices without sudden increases when the world oil market fluctuates strongly, at this point, is the existence of the Oil Stabilization Fund still necessary when the oil price fluctuation range has clearly changed in both price and product structure?

Chairman of the Vietnam Petroleum Association (VINPA) Bui Ngoc Bao said that according to legal regulations, each petroleum trader must open a separate account to track the amount of money spent and deduct from the Petroleum Price Stabilization Fund according to the announcement of the Ministry of Industry and Trade in each petroleum price management period.

Petroleum trading enterprises are responsible before the law for fund management and reporting to the Ministry of Industry and Trade and the Ministry of Finance. If there is no decision to spend the Price Stabilization Fund according to the direction of the Ministry of Industry and Trade and the Ministry of Finance, this fund will in fact only be deposited in the bank and will not affect the market.

Accordingly, some enterprises transfer (account, convert from one term to another) on time, some enterprises do not transfer on time, but in general, the total amount of this transfer "cannot be ambiguous" because there is also a post-audit and supervision stage of the management agency. Therefore, enterprises that do not transfer or owe the fund are in violation of regulations.

In fact, during the years of the COVID-19 pandemic, many petroleum wholesalers suffered losses because the selling price at some points was lower than the cost price, so they did not transfer the Price Stabilization Fund and fell into debt to the fund.

According to Mr. Bao, the Petroleum Price Stabilization Fund in previous years was a tool of the Government to ensure that petroleum prices did not increase dramatically in the context of strong fluctuations in the world market.

However, at this time, the fluctuation amplitude of oil prices compared to the time of establishment of the Petroleum Price Stabilization Fund before the 2012 Price Law was issued has clearly changed in both price and product structure, so it is no longer purely proportional and the difference is too large.

This fund in fact only compensates a part and is currently existing at a different time than when it was established. Therefore, the management agency should consider abolishing this Petroleum Price Stabilization Fund, said the Chairman of VINPA.

Similarly, economic expert Vu Vinh Phu (former Deputy Director of Hanoi Department of Industry and Trade) in many interviews with the press emphasized that the decision to establish the Petroleum Price Stabilization Fund stipulated that this fund "will be effective during the period 2012-2016." However, since then, the Petroleum Price Stabilization Fund still exists.

In fact, from October 2023 to the operating period on August 8, 2024, the Ministry of Finance and the Ministry of Industry and Trade did not set aside or spend the Petroleum Price Stabilization Fund, while at the end of 2023, this fund still had nearly 7,000 billion VND left.

The price stabilization fund is to stabilize gasoline prices, but in reality the fund is "inactive," so the existence of this fund needs to be reviewed, Mr. Vu Vinh Phu said.

In the latest draft Decree on petroleum business that the Ministry of Industry and Trade has just completed and sent to the Ministry of Justice for appraisal, it is stated that in the past, during the inspection and examination process, specialized agencies of the Party and Government have commented that the allocation and use of the price stabilization fund as prescribed for a long time is not in accordance with the Law on Prices.

Also according to the Ministry of Industry and Trade, with the current implementation of the price adjustment cycle of 7 days/time, the price fluctuation between 2 basic adjustments is not large, therefore, the impact of gasoline price adjustment on the socio-economic situation is not large, and it is very rare to have to use the Petroleum Price Stabilization Fund to stabilize gasoline prices.

VINPA Chairman Bui Ngoc Bao said that if the Petroleum Price Stabilization Fund is still wanted, it should be transferred to the State for management, not left to businesses to manage as it is now.

In fact, in developed countries, national oil reserves are usually 3-6 months, even 9 months. When world oil prices are high, they are sold or used to stabilize the market, and when world prices are low, they are bought in reserve to operate effectively.

Besides, price stabilization can also be done through tax and fee policies or gasoline price insurance, leaving the rest to the market to operate.

Only then will the supply of gasoline be guaranteed, prices will be competitive among businesses, and consumers will benefit, said VINPA Chairman Bui Ngoc Bao.

The Government is also directing research to reflect recommendations on the establishment of a Petroleum Exchange to increase publicity and transparency, overcome recent instability in the petroleum market, and on that basis, have appropriate implementation solutions according to authority and legal regulations.

The operating petroleum trading floor will publicize information on prices and trading volumes, thereby minimizing the possibility of price manipulation, creating a flexible and quick pricing mechanism and improving the distribution and circulation of petroleum.