1 ef VIETNAMS FUEL PRICE HIKE AND GOVERMENT SOLUTIONS PHAN THUY CAO DUONG GBS210251 UNIVERSITY OF GREENWICH – ACADEMIC ENGLISH 2 2 Table of Contents ABSTRACT 3 I INTRODUCTION 3 II RATIONALE OF RESEARCH 4 III CURRENT PROBLEMS 4 1 CURRENT SITUATIONS FUEL PRICE IN VIETNAM 4 2 CURRENT PROBLEMS 4 IV POSSIBLE CAUSES 6 V CONTEMPORARY SOLUTIONS AND EVALUTION 6 VI CONCLUSION 7 REFERENCES 8 3 ABSTRACT Since October 2021, Vietnam has seen an increase in demand for petroleum products, as w.
UNIVERSITY OF GREENWICH – ACADEMIC ENGLISH ef VIETNAM'S FUEL PRICE HIKE AND GOVERMENT SOLUTIONS PHAN THUY CAO DUONG - GBS210251 Table of Contents ABSTRACT INTRODUCTION I II RATIONALE OF RESEARCH III CURRENT PROBLEMS CURRENT SITUATIONS FUEL PRICE IN VIETNAM CURRENT PROBLEMS IV POSSIBLE CAUSES V CONTEMPORARY SOLUTIONS AND EVALUTION VI CONCLUSION REFERENCES ABSTRACT Since October 2021, Vietnam has seen an increase in demand for petroleum products, as well as an increase in fuel costs, in response to worldwide demand and price increases Fuel prices in Vietnam have risen by more than 52% to a seven-year high, with worldwide rates also rising as demand grows in emerging economies Many research, papers, and publications reveal that the sharp spike in fuel costs has had a significant impact on people's everyday life This has an impact not just on people's lives, but also on the economy and the environment Many governments have eased restrictions to reopen their economy, boosting fuel consumption and raising prices As a result, the Vietnamese government has taken a number of steps to minimize the impact of rising gasoline costs, such as cutting environmental tax rates and expanding imports to ensure supply The circumstances, repercussions, and government solutions to this problem will be fully examined in the article below Key words: fuel price, rise, significant impact, steps, goverment I INTRODUCTION The world continues to experience inflationary pressure as the COVID-19 epidemic is progressively brought under control, and as the economy improves, so does the demand for petroleum The government's openness of the economy to integration with other countries, limited petroleum organizations, and other variables have all had a role in the abrupt surge in gasoline prices Political turmoil and exploitation developed as a result Simultaneously, the administration has devised several remedies to the country's most pressing concerns Rising gasoline prices not only increase the cost of goods and services, but also directly affect people's income and spending VnExpress International (2021), VietNam Briefing (2022), and Youth News (2022) have clearly outlined the general situation and reasons for the sudden increase in gasoline prices VietNam Law&Legal Forum (2022), VietNam News (2021), and VnExpress International (2022) have highlighted the strong effects of rising gasoline prices on businesses and people As a result, the government's contemporary solutions were also highlighted to ameliorate the consequences of rising gas prices through VietNam Plus (2022) and VietNam Pictorial (2022) Faced with this problem, the Vietnamese government has taken steps to limit the most risks that the increase in gasoline prices brings This article will investigate the problem, as well as the negative consequences of the fuel price rise, and evaluate the government's options It may be claimed that the government has to come up with practical and effective answers to this problem II RATIONALE OF RESEARCH A record high gasoline price can have major impacts on the transportation industry, consumer goods prices, and production costs of businesses, especially when the effects of COVID-19 are still there This study was conducted for the incorrect objective of determining the direct and indirect causes of the increase in gasoline prices, as well as analyzing the Vietnamese government's response to the issue At the same time, the issue will present various potential answers to this problem III CURRENT PROBLEMS Current situations fuel price in VietNam According to Anh (2022), fuel prices in Vietnam have jumped by almost 52% to a seven-year high This year, the government has raised fuel prices by 40.23–52.59 percent, with the most recent boost on Tuesday bringing the popular RON 95 gasoline to VND24,330 ($1.07) per liter, the highest since May The price stabilization fund, in particular, was designed to compensate for variations in global fuel prices, which are in short supply, and Petrolimex, the state-owned petroleum distributor, now maintains a balance of VND 262 billion in the fund Current problems According to Thu (2022), the government raised fuel prices by VND 1,000 per liter of gasoline and VND 750 per liter of oil in a recent rise This is the sixth price rise since October 2021, and the fourth since the start of this year The graph depicting Vietnam's escalating fuel prices is as follows: Gasoline price fluctuation chart (source: VietNam Briefing) Nguyen Bich Lam, former General Director of the General Statistics Office at VietNam Law&LegaL Forum (2022), pointed out that inflationary pressure, decreased competitiveness of local goods, and price increases for commodities in circulation are all negative effects of rising gasoline prices that also have an adverse impact on economic growth In Vietnam, a 10 percent rise in gasoline prices would pull GDP down by around 0.7 percent, presenting a huge impact of fuel prices on economic growth In order to control taxes related to gasoline, the government has tasked the Ministry of Industry and Trade with keeping an eye on gas prices around the world and collaborating with the Ministry of Finance to assess pricing and tax issues The two ministries must work together, as well as businesses, to effectively use the Petrol Price Stabilization Fund to guarantee that the selling price is established in line with the global price The impact of rising gasoline prices on inflation and economic growth would be mitigated by managing them in this way Likewise, according to the Taxes and fees to be cut to curb petrol prices conducted by VietNam Pictorial (2022), the ongoing price rises put pressure on both consumers and wholesalers To help slow the rise in retail fuel prices, they anticipate a significant drop in the environmental protection levy on gasoline goods As a result, the Finance Ministry reported that the government has approved a halving of the environmental tax on fuel rather than the earlier suggested reduction of 25% IV POSSIBLE CAUSES Prices for oil and gasoline in Vietnam have been drastically rising for a number of reasons As Vietnam opens up along with other countries employing a ‘live with the virus’ strategy, several governments have eased limitations to reopen their economies and recommence production, raising fuel demand resulting in higher prices Secondly, because the Organization of Petroleum Exporting Countries (OPEC) still regulates oil production instead of expanding output, supply is limited Third, political uncertainty and geopolitics occurring in some countries such as the Russia-Ukraine issue have also indirectly pushed up prices (Nguyen, 2022) Additionally, a lack of global supply and high demand in the US, the largest consumer nation, are thought to be the causes of this increase Further, as a result of Nghi Son Refinery, the nation's largest oil refinery, cutting production by 20% since January due to financial issues, Vietnam's fuel prices shot up considerably, leading to a shortage of gasoline in the nation Despite having obtained the short-term investment, there are worries that the refinery would have to shut down if it cannot obtain enough loans to pay for the Kuwaiti crude it needs to operate These are the primary factors that have caused the abrupt spike in gasoline costs, which has had a substantial effect on production, people's lifestyles, and corporate competitiveness As a result, both the direct and indirect costs of input materials will increase when the price of gasoline rises V CONTEMPORARY SOLUTIONS AND EVALUTION According to expert Nguyen Bich Lam at VietNam Plus (2022), the Ministry of Industry and Trade, the Ministry of Finance and businesses closely follow the developments of the petroleum market, and the world political situation affecting petroleum supply to have a solution flexibly respond to rising world oil prices, and at the same time improve domestic oil extraction and refining capacity to minimize adverse impacts on growth and inflation in 2022 and subsequent years Additionally, the Ministry of Industry and Trade has a comprehensive solution to guarantee a more ample long-term petroleum supply for the economy In particular, the Ministry needs to suggest to the Government that the capacity of petroleum reserves be expanded and improved to meet the needs of the economy longer and to lessen dependence and the negative effects of high world petroleum prices on the stability and growth of the domestic economy To enhance supplies amid concerns of shortages in some areas, the government is also planning to auction 100 million liters of RON 92 gasoline at $0.62 per liter from national reserves this month Furthermore, if gasoline prices continue to rise, Vietnam will need to reduce taxes and fees in addition to using the petroleum price stabilization fund, according to a leader from the Ministry of Industry and Trade (MoIT), according the Taxes and fees to be cut to curb petrol prices conducted by VietNam Pictorial (2022) In Vietnam, taxes, and fees such as excise tax, import tax, environmental tax, and value-added tax make up around 42% of the cost of gasoline Because the domestic price of gasoline depends on the world, the problem is how to keep the domestic price close to the increase of the world price That is why tax cuts should be considered in the Government's measures, including reducing excise taxes and protecting the environment In addition, the proposed solution to a price shock that is affecting mainly fuels with high transportation costs targeted temporary subsidies for gasoline and primary fuel users should be considered to ease difficulties and ease inflationary pressures Governmental initiatives to minimize the risks of growing gas costs are sensible and are likely to lessen the effects of gas prices on society To limit adverse effects on GDP and inflation, however, solutions must be managed effectively and flexibly, and changes in the price of gasoline require specific attention As a result, the state needs a sound policy that addresses both inflation management and relieves pressure on gasoline prices VI CONCLUSION The issue of our nation's fast increasing gas costs, their consequences, and the government's initiatives to address this dilemma have all been discussed above It is clear that the economy and society are greatly harmed by the continually fluctuating gas prices, which have also put a lot of pressure on individuals and businesses Numerous factors, both domestically and internationally, contribute to the rise and fluctuation of gasoline prices To reduce the hazards brought on by exorbitant gas costs, the government has enacted relatively sensible rules, which has resulted in a beneficial shift Above all, the state and government will need new and more effective strategies to lessen strain on the domestic economy and people's lives in order to lessen the effects of increasing gasoline REFERENCES VNExpress International (2021) Rising global prices push Vietnam's fuel prices to the highest level in year Available at: https://e.vnexpress.net/news/business/economy/global-hike-pushes-vietnam-fuelprice-to-7-year-high4377626.html#:~:text=The%20government%20has%20hiked%20fuel,prices%20have%20also% 20been%20rising (Accessed at: 27 October 2021) VietNam Briefing (2022) Vietnam’s Fuel Price Hikes Affecting Businesses, Government Considers Tax Cuts Available at: https://www.vietnam-briefing.com/news/vietnams-fuel-price-hikes-affectingbusinesses-government-considers-tax-cuts.html/ (Accessed at: 25 February 2022) Youth News (2022) Gasoline prices jump to historic peak in Vietnam Available at: https://tuoitrenews.vn/news/business/20220311/gasoline-prices-jump-to-historicpeak-in-vietnam/66127.html (Accessed at: 11 March 2022) VietNam Law & Legal Forum (2022) Rising petrol price severely affects the economy Available at: https://vietnamlawmagazine.vn/rising-petrol-price-severely-affects-the-economy48310.html (Accessed at: 22 June 2022) VietNam News (2021) Rising gasoline prices spell trouble for businesses Available at: https://vietnamnews.vn/economy/1071997/rising-gasoline-prices-spell-trouble-forbusinesses.html (Accessed at: November 2021) VietNam Plus (2022) Rising gasoline prices will have a strong impact on growth and inflation pressure Available at: https://www.vietnamplus.vn/gia-xang-dau-tang-se-tac-dong-manh-toi-tang-truongva-ap-luc-lam-phat/772916.vnp (Accessed at: 14 February 2022) VietNam Pictorial (2022) Taxes and fees to be cut to curb petrol prices Available at: https://vietnam.vnanet.vn/english/tin-tuc/taxes-and-fees-to-be-cut-to-curb-petrolprices-287737.html (Accessed at: 22 February 2022) VNExpress International (2022) Helping poor households cope with rising fuel prices Available at: https://e.vnexpress.net/news/economy/help-poor-households-cope-with-rising-fuelprices-wb-4476186.html (Accessed at: 15 June 2022) @@Link Photo VietNam Briefing (2022) Vietnam’s Fuel Price Hikes Affecting Businesses, Government Considers Tax Cuts Available at: https://www.vietnam-briefing.com/news/vietnams-fuel-price-hikes-affectingbusinesses-government-considers-tax-cuts.html/ (Accessed at: 25 February 2022) VietNam Plus (2022) Ho Chi Minh City: Only 2% of petrol stations limit selling gasoline Available at: https://www.vietnamplus.vn/thanh-pho-ho-chi-minh-chi-2-cua-hang-xang-dau-hanche-ban-xang/774205.vnp (Accessed at: 21 February 2022) 10 ... October 2021) VietNam Briefing (2022) Vietnam’s Fuel Price Hikes Affecting Businesses, Government Considers Tax Cuts Available at: https://www.vietnam-briefing.com/news/vietnams-fuel-price-hikes-affectingbusinesses-government-considers-tax-cuts.html/... 2022) @@Link Photo VietNam Briefing (2022) Vietnam’s Fuel Price Hikes Affecting Businesses, Government Considers Tax Cuts Available at: https://www.vietnam-briefing.com/news/vietnams-fuel-price-hikes-affectingbusinesses-government-considers-tax-cuts.html/... Vietnam's escalating fuel prices is as follows: Gasoline price fluctuation chart (source: VietNam Briefing) Nguyen Bich Lam, former General Director of the General Statistics Office at VietNam