A workshop on fuel distribution management organized by the Vietnam Confederation of Commerce and Industry (VCCI) yesterday heard complaints from fuel retailers attending the event. 

Vice Secretary of VCCI Dau Anh Tuan, said: “The fact that retailers have to keep selling fuel at a loss has not been seen for years."

He said that it goes against supply and demand and the basic principles of the market economy that Vietnam is pursuing. 

The problem lies in Decree 95 which took effect in January, which analysts describe as the state intervening in the market "by halves". 

On one hand, the state doesn’t set a minimum discount rate and maximum wholesale price, implying respect for transactions. But on the other hand, the state intervenes in business freedom by setting maximum retail prices, and inspecting and fining retailers who stop selling.

In other words, the state fears overly high fuel prices will affect social security, macro balancing and the entire economy, but businesses are the ones that have to bear this.

As a result, many filling stations have had to shut down as they cannot continue to take losses, while other stations continue selling at a moderate level, which has not happened for decades. 

Even when the Iraq war broke out and the oil price surged to $140 per barrel, Vietnam did not face a fuel distribution disruption.

Fuel retailers say they receive no discount from petroleum distributors. Meanwhile, they have to spend at least VND100 million a month to run a filling station.

“How can we cover expenses and keep operating if the discount rate is zero? We have been incurring losses over the last year and the situation has become unbearable,” they said.

Under current regulations, fuel retail is a conditional business type and retailers must give legitimate reasons if they want to stop selling. 

Otherwise, they will be fined, or even have their licenses revoked. This is more serious at filling stations in remote areas where state-owned enterprises cannot reach. They still sell to ensure social welfare.

There are about 950 independent fuel retailers with more than 9,000 filling stations, not including state-owned enterprises. 

The figure accounts for 53 percent of total filling stations. From March 2022 to now, the enterprises may incur losses of up to VND3-4 trillion.

Fuel wholesalers also complain that they are facing difficulties. Vietnam has 33 fuel importers, but only half of them now import products. 

The prices are very high, while the exchange rate fluctuates and they must keep inventory for 20-day use.

“It is reasonable that retailers demand discounts. But we ourselves incur heavy losses, so we cannot offer discounts to them,” an importer said.

Management needs changes

Under the current management system, the state management agency holds the right to determine fuel prices, but it doesn’t set business costs and discount rates, which causes many enterprises to take a loss. 

The fuel shortage is not because of a supply shortage, especially as oil prices have returned to levels seen before the Ukraine-Russia conflict.

Experts have warned that the situation may lead to mass shutdowns, which will threaten the energy supply of the country. 

What to do to make the fuel market run sustainably? The answer is to let the market operate. The ceiling retail prices, price intervention and petrol price stabilization fund all need to be removed.

The state needs to take responsibility for ensuring energy supply, and this task should not be put on businesses. 

Tran Thuy