Rising gasoline prices spell trouble for businesses

As gasoline prices rose to the highest level in seven years during October, many enterprises are troubled by the cost of resuming business after the long period of social distancing caused by COVID-19.

On October 27, a litre of RON95 gasoline was VND24,000(US$1); a litre of E5RON92 gasoline cost VND23,000. With added pressure on freight rates, the price of many consumer goods increased, especially as businesses attempt to recover after months of inactivity.

According to the Ministry of Industry and Trade (MoIT), the increase in domestic gasoline prices is due to the increasing price of petroleum products in the world. Since October 11, global prices increased by about 10.4 per cent for RON92 gasoline, more than 11.2 per cent for RON95 gasoline and 7-8 per cent for oil products.

MoIT and the Ministry of Finance (MoF) calculated the price of gasoline products could increase from VND1,859 to VND2,527 per litre without support from the balance fund. However, the inter-ministerial committee still decided to use the fund for both E5RON92 and RON95 products to lower the prices.

Despite this, the price increase has put many businesses and drivers under heavy pressure.

Vu Tuyet Hanh, representative of Cuong Thang Transport Company, specialising in transporting goods on the North-South route, said that during the pandemic, her businesses have been facing many difficulties. Now, some circulation has returned but the gasoline price increase has caused the cost of the business to increase, forcing hers to recalculate freight in the near future.

Hanh said the gasoline price has increased about 30 per cent, adding, “It is a lot for the transport businesses to bear when they had to suffer so much in the pandemic.”

Representative of Thanh Nga Taxi, Luong Quoc Vy said, “The sharp increase in gasoline prices had an impact on both the economy and the social and life of businesses. “

Vy added, “Gasoline prices account for 40 per cent of the transportation cost, so the sharp increase in gasoline recently has made it difficult for businesses. The price of travelling cannot increase according to the price of gasoline because businesses have to compete with other technology travelling units. It is very difficult.”

Nguyen Hai Dong, a driver on the Ha Noi – Noi Bai route, told Viet Nam News: “With the current gas price, we can barely make a profit.”

“For 60km back and forth between the two destinations, the driver gets about VND400,000 but he has to pay half for the cost of gasoline and the rest is for meals and parking fees.”

He said he may take a break from business. “In such a pandemic, the number of passengers to the airport is small, while the price of gasoline and parking fees have increased,” he said.

A representative of the Transport Association of Ha Noi, Bui Danh Lien, said many transport enterprises forecast a rise and have planned to reduce or stop operations to avoid more losses.

Lien urged ministries to find solutions to reduce taxes and fees to support businesses, adding: “Without increasing in freight rates, the more they operate, the more they lose.”

Mentioning the use of an inter-ministerial price stabilisation fund, Lien said: “It is just in time, but it needs to be more transparent on how the funds can be used, and how it relates to the import and export of petroleum products.”

At the same time, Lien considered Viet Nam to be moving towards opening the petroleum market so that many businesses can participate in import and distribution.

As for businesses, Lien said they must try to cut unnecessary expenses to survive and increase the freight cost, negotiating with partners and declaring the price list.

The increase in gasoline prices has also had an impact on consumer goods. At some markets in Ha Noi, many small traders said that prices increased sharply compared to the middle of the year.

Nguyen Thi Hoa, the owner of a food shop on Doi Can Street in Ha Noi, told Viet Nam News that raw materials have increased but she can not increase her food price.

Hoa said: “I have lost so many customers in the social distancing, if I increase the prices now, I will lose more.”

Hoa added: “Now I must pay for the higher cost for shipping because of increasing petrol prices.”

Lots of fashion shops shared the same thing. They must pay for higher shipping fees but cannot raise the price or they will risk losing customers.

According to the insiders, due to high transportation costs, along with limited supply due to the cold weather, storms, and increased demand at the end of the year, prices will increase even more.

In a bigger picture, the increase in gasoline and oil prices will lead to an increase in transportation charges, and an increase in the price of consumer goods will most likely affect CPI and inflation.

To deal with the gasoline prices, Tran Duy Dong, Director of the MoIT’s Domestic Market Department, said that the ministry suggested the Prime Minister direct the MoF to consider reducing taxes and fees such as import tax, excise taxes and environmental protection taxes, to help improve the situation. 

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