VietNamNet Bridge – The sharp decrease in world oil price over the past three months is expected to affect Vietnam’s oil export earnings as well as a wide range of socio-economic aspects.

As the budget revenue estimate for 2015 was calculated based on the oil price of around 100 USD per barrel, the Government recently had to convene a meeting to discuss ways to respond to this trend.

The meeting agreed that with the low world price, it is inevitable that the country would have to reduce output and even suspend production at some wells where pumping cost is high.

According to the Industry and Trade Ministry, when the price falls to 40 USD per barrel, crude oil output and export would be cut by between 1.8-2 million tonnes. As a result, the production target of 14.74 million tonnes of oil equivalent this year would not be met, not to mention adverse impacts on oil exploitation and refinery projects both at home and abroad.

Nguyen Xuan Son, Chairman of PetroVietnam Member Council, said the group has developed its own scenarios for 2015. Accordingly, the group’s total revenues would drop to 434.5 trillion VND (20.2 billion USD) and remittance to the State budget would be only 79.8 trillion VND (3.7 billion USD) in case the oil price is 40 USD per barrel compared to 718 trillion VND and 159 trillion VND, respectively, if the price is 100 USD per barrel.

Minister of Planning and Investment Bui Quang Vinh noted that every 1 USD reduction in oil price means a loss of nearly 1 trillion VND (46.5 million USD) for the country, and if the world price falls to 40 USD per barrel, Vietnam’s earnings from oil will be slashed by nearly 70 trillion VND (3.25 billion USD).

He nevertheless said that the losses can be made up with increases in economic growth and tax collections. According to the ministry’s calculation, budget revenues will be reduced by 1.5 trillion VND when the oil price stands at 60 USD per barrel, 9.5 trillion VND when the price drops to 50 USD and 11.5 trillion VND when oil is at 40 USD per barrel.

The economic growth is also expected to suffer from the oil price fall, and in the worst scenario with oil price at 40 USD per barrel, the growth for this year would be only 5.2 percent instead of the targeted 6.2 percent, according to Minister Vinh.

He was quick to add that even then, there would be good things for the economy such as less dependency on oil export and more economical spending.

However, many economic experts said the falling world oil price is not that worrying, as the public and society has benefited greatly from it. As petrol price has reduced by more than one third, from 25,000 VND per litre to nearly 16,000 VND, transport costs have begun to decrease, helping businesses cut costs and increase profit.

According to statistics experts, a 20 percent reduction in petrol price could bring about a GDP growth of between 1.8 and 2 percent.

VNA