Following the monthly cabinet meeting yesterday, MOF decided to increase the prices of petrol & petroleum products, in a move that caught the market and the public by surprise. This follows recent media talk of a possible price decrease and reflects the fact that the stabilization fund which is used to smooth fluctuations in prices has already been depleted.
Hence the move should be seen as primarily a budgetary one driven by MOF’s desire to claw back some of the subsidy paid out YTD. Even so it went against the trend and has caused a bit of a stir.
As follows the prices of each product were increased;
- Increased petrol prices by 6.1% on average; by VND1430 per liter for A92;
by VND360 per liter for DO; and by VND480 per liter for KO,
- Increased the fix cost, which is the fixed operating expenses for wholesalers, by VND260 per liter, up from VND600 to VND860.
- Restated the minimum profit of VND300 per little up from zero at the last cut in February.
- Cut deductions from stabilization to zero from VND2,000 for A92, which means no more subsidy will be given to petrol wholesalers.
- Kept the reserve payment to the stabilization fund unchanged at VND300 per liter, in order to re-build the stabilization fund.
With these changes, we estimate that wholesalers will now make a profit of around VND563-226 per liter based on the 30-day average import price method, and VND560-749 based on the 10-day average import price method.