Consumers have recently expressed their concerns about unhealthy competition by wholesale petroleum businesses that joined hands to manipulate the market. They say that once petrol prices are regulated in line with the market mechanism, they will be adjusted according to the global oil fluctuations.

In fact, these petroleum businesses proposed raising the domestic retail prices by around 30 percent to VND19,000/litre in July when the global oil rocketed to a record high of US$145/barrel. When the global prices fell sharply to below US$100/barrel and even to US$86/barrel, they proposed lowering domestic retail prices slightly to VND17,000/litre in September and VND16,500/litre on October 8. The consumers say there are signs of market manipulation.

Signs of violations

Dr Vu Dinh Anh, deputy director of the Market and Price Research Institute under the Ministry of Finance says that the market laws of supply and demand are normally based on business competition. However, the Vietnam National Petroleum Corporation (Petrolimex) has a virtual monopoly on petrol business activities since it holds more than 70 percent of the domestic market share.

Petrolimex’s monopoly has not motivated 10 other petroleum import businesses to reduce their production costs and retail prices, says Dr Anh.

Petroleum businesses cry out that they have faced losses whenever global oil prices go up, despite inter-ministerial adjustments. However, nobody knows exactly how much these businesses have lost in their operation.  

For his part, senior economic expert Le Dang Doanh says that petroleum companies should make public their financial reports.

“Petrol is an essential commodity for the national economy, and there is no point in keeping its operations a secret,” says Mr Doanh.

Dr Anh echoes Mr Doanh, saying the electricity sector is another case in point. He quotes an official from Electricity of Vietnam Group (EVN) who recently revealed that the sector has offset losses for households using less than 100kWhs per month and made a profit for those consuming more than 100kWhs per month.

Economic experts agree that there are signs of market manipulation by petroleum businesses following their decision to lower retail petrol prices by VND500/litre on October 8.

“Petroleum is a typical product which is not imported by any businesses. Therefore, there are signs of monopoly in the petroleum sector,” Mr Doanh confirms.

A probe into the case

Dang Hoang Hai, deputy head of the Competition Management Department, says it is a common occurrence that businesses make use of legal loopholes to collude with each other and manipulate the market. This practice can be easily seen in Vietnam where the petroleum sector is controlled by only a few big importers. 

“We have not made any conclusions yet because no investigations have been launched,” says Mr Hai.

However, he does not rule out a possibility that petroleum businesses have teamed up to corner the market. He says his department has made a request to the Ministry of Industry and Trade.

“This matter cannot be solved overnight, because unhealthy competition is seen in other economic sectors. The Competition Management Department will put forward a new mechanism to ensure such unhealthy competition will not occur in future,” says Mr Hai.

According to him, his department will launch a probe into the case if it is given the green light from the Ministry of Industry and Trade.

Senior economic expert Doanh also proposes that the Consumers’ Protection Association and other science-technology associations join hands to look into the case.

Price management – a thorny issue

No matter what happens, price management remains a thorny issue that needs to be resolved soon in the market economy.

“One of our weaknesses is the poor management of market prices,” says Nguyen Duc Kien, member of the National Assembly Committee for Economic Affairs.

To judge his argument, he cites several adjustments of retail petrol prices in recent times as examples. Domestic retail petrol was sold at VND12,000/litre when the global oil price stood at US$80/barrel last year. The price should have been raised to VND19,000/litre when global oil hit US$147/barrel in July. However, domestic businesses decided to raise the price when global oil slumped to US$130/barrel.

Mr Kien attributes Vietnamese businesses’ failure to keep pace with global fluctuations to their poor business administration skills.

Meanwhile, Dr Anh points out that although Vietnam has pursued the market economy, businesses still have to seek permission from state agencies when deciding to either increase or lower selling prices, not to mention the fact that it takes much time to get the final approval.