Vietnam is moving towards a system where fuel retail prices are determined directly by companies. Under the new system, prices at gas stations may vary even on the same day, and a single station's price could change between morning and afternoon.
According to local media outlets such as VnExpress on October 2, the Ministry of Industry and Trade is reviewing a draft decree that would transition from the current system of regular government price announcements to a company-centered pricing structure. Companies will apply a common formula set by the government but will calculate retail prices based on actual purchase costs and procurement expenses.
The key aspect of this pricing method is the increased autonomy for companies. Nguyen Viet Son, Deputy Minister of Industry and Trade, stated during a meeting on September 30 that the management of retail fuel prices directly impacts both businesses and consumers. The new system will eliminate the government's regular announcements of benchmark prices, allowing companies to set prices based on market conditions.
Tran Huu Lin, Director of the Domestic Market Management Department, explained that differing prices at various gas stations will be a natural outcome of the new system. He noted, "Companies will have complete control over retail prices. Once the decree is enacted, we must accept that prices at different stations will vary." He added that within a single station, gasoline prices could rise in the morning and drop in the afternoon, depending on the company's business strategy.
Companies will base their pricing on a formula that includes purchase costs, procurement expenses, standard operating costs, profit margins, and taxes. While companies will determine purchase costs and profit margins, standard operating costs will remain under government oversight.
The Ministry of Industry and Trade plans to set an initial standard for operating costs, allowing companies to adjust these costs annually based on changes in the consumer price index (CPI). The government will review and announce relevant standards every three years based on independent audit reports submitted by companies.
The liberalization of prices is expected to directly impact competition among gas stations. Lin stated that since each company has a different cost structure, retail prices will also vary, allowing consumers to compare prices across stations and distribution networks. Companies with lower costs and more efficient supply chain operations may lower their prices to attract customers, according to the Ministry of Industry and Trade.
However, the price differences may not lead to uniform competition across all regions. The Ministry has identified potential regional price disparities, particularly in areas with fewer operators and retailers, as a key issue with the new system. Since companies will have the freedom to set prices, discount rates within distribution networks may also vary based on each company's business strategy and cost allocation.
The Vietnam Petroleum Association has expressed that price liberalization could enhance market competition. Tran Quang Khanh, the association's permanent vice president and secretary-general, explained that expanding companies' pricing authority aligns fuel prices with market principles. He stated, "Consumers have the right to choose. If one gas station sells at 10,000 dong and another at 10,200 dong in the same area, the consumer will decide where to buy."
Nguyen Van Duc, Deputy Director of the PetroVietnam Gas Corporation, also noted that the ability to reduce costs will determine price competitiveness. He remarked, "It is unlikely that two nearby gas stations will sell at significantly different prices. No one will buy from a station with higher prices," adding that to compete, companies must sell at or below market price levels.
In addition to price liberalization, the government is also pursuing a restructuring of the distribution system. The Ministry has observed that the oil distribution network has too many intermediaries, leading to increased costs and decreased efficiency over the past 10 to 15 years. The new draft decree aims to simplify oil operators into two main categories: wholesalers and distributors.
The government will not completely withdraw from price management. Deputy Minister Nguyen Viet Son emphasized that since fuel products significantly impact production, business activities, daily life, and energy security, the government will retain oversight and intervention capabilities.
The draft includes provisions for activating price stabilization measures if prices fluctuate continuously for one to four weeks or if short-term cumulative changes exceed 15 to 20%, significantly impacting the socio-economic landscape. The Ministry of Industry and Trade and the Ministry of Finance may propose price stabilization policies and durations to the government as needed, utilizing measures such as minimum supply levels, distribution and national reserves, taxes, fiscal and monetary policies, and price stabilization funds. Depending on the situation, the government may also directly manage gasoline and diesel prices for a certain period.
There have been calls for clearer criteria for intervention during rapid price changes. Petrolimex has stated that specific guidelines should be established for when to activate stabilization measures in the event of a 15 to 20% price fluctuation to prevent differing interpretations in the field. The Ministry of Industry and Trade plans to review significant issues affecting the market, businesses, and consumers before submitting them to the relevant authorities.
Meanwhile, the Vietnamese government is also working on connecting oil market data online. The Ministry of Industry and Trade is integrating systems for managing import and export, inventory, distribution, and invoicing information, and is developing an application that allows consumers to check gas station locations, fuel types, prices, and additional services. As companies gain more pricing authority, ensuring transparency in price differences across stations and clarifying intervention criteria during rapid price changes will remain key challenges for the new system.
* This article has been translated by AI.
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