THE MINISTRY OF INDUSTRY AND TRADE EXPLAINS THE REASON OF COMPLEX PRICES WHEN THE WORLD'S OIL PRICE COOLED DOWN

At the price management session on May 11, the price of RON 95 gasoline set a record when the retail price reached nearly 30,000 VND/liter after increasing by 1,550 VND/liter. E5 RON 92 gasoline also increased by 1,490 VND/liter, at 28,950 VND/liter. Meanwhile, world crude oil prices (WTI and Brent) are currently below their March peak.

 Petrol prices in the country increased. Photo: VNA

Many questions arise around why the world price has cooled down, but the domestic gasoline price has increased to a record.

In the past 10 days, the average price of crude oil on the world market has been below 110 USD/barrel, sometimes falling below 100 USD/barrel.

In March, the price was close to the threshold of 120 USD/barrel, there was a time when Brent reached 139.13 USD/barrel and WTI reached 130.50 USD/barrel, but the retail price at that time was still 160 VND lower than today. /liter (RON 95).

The Inter-Ministry of Industry, Trade and Finance explained that, in fact, the retail price of gasoline in the country is based on the price of petroleum products on the Singapore market (Platt price), not based on the price of crude oil such as Brent or WTI.

Because, to have a finished petroleum product, crude oil needs to go through a refining process. Each barrel of crude oil has a capacity of nearly 159 liters, after the refining process will give about 76 liters of gasoline, the rest are diesel, kerosene, and fuel products.... That is, the gasoline output is only equivalent. 50% of the original crude oil.

According to data from the Ministry of Industry and Trade, the average price of petroleum products in the world between May 11, 2022 and May 4, 2022 is 136,968 USD/barrel of RON92 gasoline used to make gasoline. E5RON92; 141,098 USD/barrel of RON 95 gasoline.

Meanwhile, this price at the operating period on March 11 (when crude oil price peaked) was $132,251/barrel of RON92 gasoline used to make E5RON92 gasoline; $135,750/barrel of RON95 gasoline.

Thus, although the crude price is much lower than the peak in March, the higher price of finished petroleum products is the cause of the hot increase in domestic gasoline prices.

The Inter-Ministry of Industry, Trade and Finance said that if the environmental protection tax is not reduced (2,000 VND per liter with RON 95 gasoline; E5 RON 92 is 1,900 VND and oil products from 700-1,000 VND per liter), the price will be Retail gasoline can increase from 3,300-3,500 VND/liter. That is, the price of gasoline RON 95 will be more than 32,000 VND/liter, and E5 RON 92 will be nearly 31,000 VND/liter.

Another point that makes gasoline prices peak this time is the inter-ministerial setting up of the BOG Fund, but not spending the Fund. The March operating period did not set up the BOG Fund and sharply increased the spending level of the BOG Fund.

"Using BOG Fund tools flexibly and reasonably to both limit the increase in domestic gasoline prices and ensure the maintenance of the BOG Fund to have room to manage gasoline prices in the coming period in the context of gasoline prices. From now until the end of the year, there will be complicated and unpredictable developments in the world," said the Ministry of Industry and Trade.