Should the Petroleum Price Stabilization Fund be abolished?

"Big oil" wants to leave the fund

At a regular press conference at the end of May, a representative of the Ministry of Industry and Trade admitted that the Petroleum Price Stabilization Fund (BOG) has recently revealed many shortcomings. The Ministry of Industry and Trade is coordinating with relevant ministries and branches to propose and send to the Ministry of Finance a basis to report to the Government for consideration. This is also consistent with the provisions of the newly issued 2023 Price Law, effective from July 1. For more information, Deputy Minister of Industry and Trade Nguyen Sinh Nhat Tan said that there are still many controversial opinions on whether to keep or abolish the Petroleum Price Stabilization Fund, and the Ministry continues to seek opinions.

According to the Ministry's viewpoint, the current fund allocation content has a number of issues that need to be adjusted and specified, and included in the draft decree on petroleum trading. The Ministry of Industry and Trade will review, evaluate and recommend whether to keep or abolish the Petroleum BOG Fund according to the provisions of the 2023 Price Law in the draft submission and the new petroleum trading decree (replacing the 3 decrees 83, 95 and 80), to be submitted to the Government this June.

Nên bỏ Quỹ bình ổn giá xăng dầu- Ảnh 1. — Key enterprises and experts propose to abolish the Petroleum Price Stabilization Fund

Previously, when giving comments on the draft of a new decree on petroleum trading, many major petroleum enterprises such as Petrolimex and PVOil proposed to abolish the petroleum BOG Fund. Petrolimex representatives said that the management agency should boldly abolish the BOG Fund because in the past, the fund had not been allocated or spent in many periods but the market was still stable. Petroleum prices are now regulated every 7 days, domestic petroleum prices have closely followed world prices, and the level of fluctuation between basic price adjustments is no longer large.

Meanwhile, to manage the BOG Fund, the main enterprises have a hard time in inventorying production output, reporting, inspection, etc. There should be specific regulations on the allocation and use of the fund so as not to affect the capital of enterprises, avoiding the situation where people misunderstand that the BOG Fund belongs to enterprises... This person said that if the purpose of maintaining the fund is to stabilize the macro economy, can enterprises propose that the state management agency directly manage the fund? The purpose is to avoid the misuse of the BOG Petroleum Fund like the cases of Xuyen Viet Oil, Hai Ha, Thien Minh Duc, etc. in the past.

Similarly, Mr. Cao Hoai Duong, Chairman of the Board of Directors of PVOil, analyzed that the current market price of gasoline and oil fluctuates unpredictably, but each price adjustment period, businesses have to nervously guess how the fund will be used and how it will be allocated... Besides, the BOG Petroleum Fund is a resource contributed by the people, so it is not inherently stable. "I recommend that if possible, the BOG Petroleum Fund should be abolished. If for many reasons it cannot be abolished, then the fund should only be used when the price is too high. That way, businesses will be less nervous and not have to guess the state's management before each price adjustment period," Mr. Duong expressed his opinion.

In fact, abolishing the Petroleum BOG Fund is not a new proposal. Previously, in the inspection conclusion, the Government Inspectorate pointed out a series of shortcomings and violations in the management and use of petroleum key enterprises, including the situation where key enterprises appropriated funds from hundreds to thousands of billions of VND. According to the latest data released by the Ministry of Finance, the balance of the Petroleum BOG Fund is currently nearly 6,700 billion VND.

In the operating periods from the beginning of 2024 to present, the joint Ministry of Finance - Industry and Trade has not used the fund, some periods have made fund allocations for some oil products. The BOG petroleum fund is being allocated and used according to the instructions in Circular 103/2021. Accordingly, this fund is only used when the difference between the base price of the announced period and the base price of the previous period adjacent to the operating period increases by 7% or more. When the price decreases by more than 5%, the fund is allocated more, in addition to 300 VND/liter as prescribed. In fact, in many previous price adjustment periods, the fund allocation was quite arbitrary, not in compliance with Circular 103.

Abandon fund and establish petroleum trading floor

Dr. Vu Dinh Anh, former Deputy Director of the Institute for Price and Market Research (Ministry of Finance), emphasized: The root of the problem is to create a truly competitive petroleum market, which we do not have yet. The State can regulate petroleum prices through tax and fee policies... and must create a petroleum market so that everything operates and is regulated according to the principles of competition. A competitive petroleum market is only created when the State assigns minimum petroleum import quotas to key traders, without intervening in import prices, import volumes or purchases from domestic factories. That is up to the key traders, they decide whether the price is competitive enough and good enough.

"The BOG petrol fund has been in place since 2009. If it is maintained at this point, it is no longer appropriate and its intervention effect on the market is negligible. Not to mention, currently, petrol prices are updated weekly according to world prices, the fund is almost untouched, and abandoning the entire amount of money collected in advance from consumers is completely unreasonable. In my opinion, the fund should be abolished," said Mr. Vu Dinh Anh.

Trade expert Vu Vinh Phu proposed to establish a petroleum trading floor, trading activities based on market principles, buying and selling at will, no one forcing anyone, buying wherever is cheap and convenient. Wholesale and retail transaction prices are calculated by enterprises themselves, profit and loss are borne by them.

"We should completely stop trading petroleum with people's money because it is not effective and is also exploited for profit. Other countries also apply this type of petroleum trading through trading floors. Vietnam has trading floors for coffee, rice, stocks, goods... which are very effective and prevent tax losses. The problem is that the state controls prices and regulates the market. Quality, price, selling price, petroleum trading units must take responsibility according to the law. It is the traders who know how to calculate the profit and loss of each drop of their petroleum according to the market. They themselves must know what to do to make customers come to them. The state only needs to create an environment of equal, public, transparent competition along with applying science and technology to check the quality of goods, inspect measuring devices. The rest is for businesses to calculate prices, compete... If any business makes mistakes, commits commercial fraud... they will be severely punished or have their licenses revoked," said Mr. Phu.

If we want the petroleum market to develop sustainably, we cannot do without national reserves. The new draft decree mentions the reserves of key enterprises. We need to build a systematic strategy for national reserves to ensure stability and sustainability for the energy industry.

"Big oil" wants to leave the fund

Abandon fund and establish petroleum trading floor

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