After basically controlling the COVID-19 pandemic, the world economy is facing with commodity prices, input material prices, especially gasoline prices, which are increasing due to the flourishing global economic activities. strongly from the bottom of the pandemic.

Demand for gasoline increased rapidly, but oil production did not increase accordingly, leading to tight supply… For the Vietnamese economy, when gasoline prices increased by 10%, GDP decreased by about 0.5%. This is a rather large decrease, reflecting the strong impact of gasoline price fluctuations on economic growth.

To better understand how petrol prices will affect Vietnam’s economy, the Vietnam News Agency reporter had an interview with Dr. Nguyen Bich Lam, former General Director of General Statistics Office around this content.

Sir, in the past time, the price of petrol in the country has continuously escalated. Could you please tell me, what are the factors that cause the price of gasoline to rise to the current level?

Although the price of crude oil is up 60% this year, the operators will not increase production. An important factor pushing up the price of oil is the fact that the Alliance between the Organization of the Petroleum Exporting Countries and its allies (OPEC +) announced that it will keep its plan to increase production, instead of increasing production higher as called by the major oil consuming countries such as the US and India.
In addition, the world is suffering from an energy crisis and facing the winter of 2021 which is forecasted to be severe, early and deep cold, so countries are increasing their petroleum reserves, causing oil prices to increase. .
Along with that, in the world market, crude oil price continued to increase in the morning session of October 21, 2021 after the US crude oil inventories suddenly decreased and the reserve at the nation’s largest storage warehouse. This hit a three-year low.
The price of US WTI light sweet crude oil rose 0.32% to $83.67/barrel on the morning of October 21, 2021. While the price of Brent oil for December delivery was at $85.89/barrel, an increase of 3 $0.5/barrel, up 0.42% compared to the price level as of October 9, 2021.
According to international organizations, gasoline prices will continue to rise in the near future. So, what are the reasons sir?
Currently, the number of people in the world being vaccinated is increasing, economies are gradually recovering, starting to open up, restarting production and business activities, travel, transportation, tourism. The calendar will prosper due to the use of the COVID-19 green card.
Goldman Sachs believes that crude oil prices will continue to rise in the next few years due to strong demand while limited supply and the crude oil market will experience the longest supply shortage in decades. over time and demand will increase, outstripping production this winter. The lack of upstream investment in oil extraction amid growing demand is an indicator of high oil prices that persist for at least the next year.

Therefore, in the coming time, the world petroleum market may still fluctuate, the possibility of gasoline prices will still increase. The world’s important energy forecasting organizations including OPEC, the International Energy Organization and the US Energy Information Administration all forecast crude oil prices could reach $100/barrel in the summer of 2022.

Sir, along with the trend of world gasoline price fluctuations, the domestic average petrol price in 9 months of 2021 increased by 24.1% over the same period last year. How does the rising petrol price affect production and business activities in Vietnam?

Vietnam’s economy is highly dependent on imported raw materials, with the cost of imported materials in the total cost of raw materials of the whole economy at 37%. When the world gasoline price increases, it will increase the price of imported and domestic raw materials.
In the production of goods and services, depending on the production process of each industry, it can be seen that most industries, more or less, use petroleum. Petrol costs account for about 3.52% of the total production costs of the whole economy. This shows that petroleum accounts for a relatively high proportion and has a strong impact on the cost of manufactured products.
In particular, the increase in gasoline prices has a strong impact on industries that use a lot of petroleum such as fishing, transporting goods and passengers by road, waterway and air.
In addition to the direct impact of increasing product costs, the increase in gasoline prices also increases the prices of goods in circulation, puts pressure on inflation, reduces the competitiveness of domestically produced goods, and has negative impacts. to economic growth.
For the Vietnamese economy, a 10% increase in gasoline prices reduces GDP by about 0.5% – a rather large decrease, reflecting the strong impact of gasoline price fluctuations on economic growth.

Could you tell me how the increase in petrol prices affects the consumer price index of the economy?

The increase in gasoline prices not only increases the cost of goods and services, but also directly increases the consumer price index (CPI), affecting people’s income and spending. A 10% increase in gasoline price makes the CPI increase by 0.36 percentage points. Besides, spending on petroleum accounts for 1.5% of total final household consumption. When gasoline prices rise, households will restructure and partially cut spending, which reduces aggregate demand in the economy.
For Vietnam’s economy, petroleum is one of the strategic commodities, can you suggest some solutions to cope with high gasoline prices to minimize the impact on growth and inflation in 2021 and 2022?
The fourth wave of the COVID-19 pandemic is the fundamental reason why Vietnam’s economic growth in 2021 is forecast to reach a much lower level than planned. 2022 is an important year, creating the foundation for implementing the goals of the Five-Year Plan 2021-2025.
At the opening session of the 2nd session of the 15th National Assembly, the Government proposed the 2022 socio-economic development plan; in which, the growth rate of gross domestic product reached about 6-6.5%; The average growth rate of consumer price index is about 4%.
In order to successfully implement the socio-economic development goals in 2022 in the context of forecasting the international and domestic situation, there are advantages and disadvantages, and challenges are intertwined, but difficulties and challenges are more. ; the world economic growth is not stable and the forecast is lower than in 2021, risks continue to increase; Domestically, the resilience and resources of the State, businesses and people have decreased, and inflation pressure has been high.

When developing a scenario of GDP growth and controlling inflation target of 4% quarterly and for the whole year 2022 as a basis for providing appropriate and flexible management solutions, besides factors such as: , implementing flexibly fiscal and monetary policies, the fluctuation of gasoline prices should be paid special attention to to minimize adverse impacts on growth and inflation.
For the Vietnamese economy, at present, petroleum is one of the strategic commodities controlled by the State, the selling price is managed on the basis of ensuring the interests between the State, businesses and people. The Government assigned the Ministry of Industry and Trade to grasp petroleum prices on the world market, and coordinate with the Ministry of Finance in analyzing price and tax factors to adjust taxes related to petrol and oil; At the same time, the two ministries and enterprises have assessed, evaluated and coordinated smoothly to use the Petroleum Price Stabilization Fund. From there, decide the selling price to match the world price, ensuring the interests of businesses and people.
Implementing this method in the management of petrol prices will partly reduce the negative impact of rising petrol prices on inflation and economic growth.
Given the “importance” of petroleum to production and consumption in the economy, it is forecast that gasoline prices may continue to increase in the remaining months of 2021 and the first half of 2022, the Ministry of Industry and Trade together with The Ministry of Finance and businesses need to closely follow the developments of the petroleum market, the world political situation affecting the petroleum supply in order to have flexible solutions to the high oil price in order to minimize the negative impact on the oil price increase. growth and inflation in the remaining months of 2021 and 2022.
Thank you sir!

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