What’s Happening in the Gas and Oil Market?

At a recent meeting with the Ministry of Industry and Trade, several key gasoline and oil traders proposed reducing the total volume allocated for the entire year of 2024. This is due to the fact that there will be no sudden surge in demand from the population. Meanwhile, many businesses have been damaged by storms, and some have incurred losses due to the sharp decline in domestic and international gasoline and oil prices, while still having to maintain a 20-day reserve, making it difficult to balance.

Loss leads to request for reduced imports

In an interview with Nguoi Lao Dong newspaper, Mr. Bui Ngoc Bao, Chairman of the Vietnam Gasoline and Oil Association, shared the reality that recently, many gasoline and oil companies have been importing at high prices but have had to sell at low prices due to the sharp drop in domestic gasoline and oil prices, with a short adjustment cycle (once every 7 days). Businesses want to reduce the total volume, at least in part, due to the large inventory economics, and if they cannot sell, they must reduce inventory. “For example, in 2024, the minimum total volume of gasoline and oil allocated to the traders is about 28.4 million m3/tons, but the actual demand is only 25 million m3/tons. If companies import and cannot sell, they will have large inventories,” said Mr. Bao. Therefore, the traders requested a reduction in imports as consumption is not high.

A key gasoline and oil trader also complained that with the sharp decline in prices as in the past, each liter sold resulted in a loss of VND1,000. Supply currently exceeds demand.

According to some enterprises, due to the continuous and constant decline in world prices, the fastest that traders can import is 20-30 days/ship, while domestic prices are adjusted once every 7 days, leading to losses for many gasoline and oil traders.

It’s not just the traders who are complaining, but also the retail gasoline and oil businesses, who are constantly struggling and blaming the traders. Mr. Nguyen Xuan Thang, Director of Hai Au Phat Company Limited (Lam Dong), said that retail gasoline and oil businesses have not been as effective as before and have been constantly losing money, leading to a series of gas stations having to close or transfer to traders and distributors. The main reason is that the discount level is too low, only VND 200-300/liter, and sometimes only VND 0, so it cannot hold on for long.

Next is the regulation on retail invoices for each sale, which has also caused fatigue for businesses, so many gas stations have stopped operating for this reason. Another reason is that many roads in Binh Phuoc, Binh Duong, and Lam Dong provinces do not meet the “conditions for business due to road boundaries and road connections”, which has also led to the closure of many gas stations. In particular, in Lam Dong province, there are quite a few gas stations that are leased or transferred.

In addition, retail gasoline and oil businesses also face financial difficulties and cannot ensure restructuring and resumption of operations. “The reason is that retail gasoline and oil businesses do not achieve a profit of 4%, so banks do not approve loans. Moreover, due to the rainy season, business declines, each gas station only sells a few hundred liters of gasoline and oil, with a profit of VND 300,000 – 400,000, which is not enough to pay salaries for employees. The four gas stations of our company rely on our own premises, our employees are family members, and we also have our own fuel transport vehicles, so we can hold on,” the business owner complained.

Mr. Van Cong That, Director of KNJ Kim Ngoc Company Limited (Ho Chi Minh City), said that a few months ago, he had prepared many premises to open new gas stations but had to temporarily stop because the business situation suddenly went down, and many gas stations stopped operating. “Usually, gas stations borrow capital to do business, but the low discounts lead to losses. There are gas stations that have been losing money for a long time but dare not close because they are in debt to banks, and if they stop doing business, they will not have money to repay the debt and their licenses will be revoked, leading to bank debt collection…” Mr. That confided.

In addition, the tightening of regulations on “land not used for the right purpose” has also led to the closure of many gas stations.

Need to ensure energy security

However, looking at the financial reports of some gasoline and oil companies for the first six months of the year shows contrasting results. Specifically, Petrolimex – a company that accounts for nearly 50% of the domestic gasoline and oil distribution market – in the first half of the year, the parent company’s profit after tax reached nearly VND 1,530 billion, up 135% over the same period last year. Consolidated profit after tax reached VND 2,420 billion, while in the same period last year it was only VND 1,558 billion. Explaining to shareholders, Petrolimex said that the reason for the large profit was that gasoline and oil business activities in the first half of this year were basically stable, effective, and sales volume increased compared to the same period in 2023.

Therefore, Dr. Vu Dinh Anh, an economic expert, opined that gasoline and oil supply cannot be decided according to the will of enterprises, because it is related to energy security, and it is impossible to chase profits, only importing when there is profit and stopping when there is a loss. “The allocation of import quotas to key gasoline and oil enterprises is to achieve this goal,” the expert emphasized.

Attorney Truong Thanh Duc, Director of ANVI Law Firm, said that the gasoline and oil market has been unstable for many years, but so far, it has not been thoroughly resolved, and it is time to build a real market. “In the context of a monopoly market, the State must ensure a stable supply, avoid being pressured by enterprises. If, due to any factor, we need to reconsider the competitive market, how is the monopoly, and ensure compliance with the Price Law?” he said.

According to Attorney Truong Thanh Duc, the supply and demand of gasoline and oil need to be adjusted according to the market and be flexible to be effective, but to do so, the gasoline and oil industry must build a real market.

Regarding the proposal of enterprises, Mr. Phan Van Chinh, Director of the Domestic Market Department, assessed that from now until the end of the year, the gasoline and oil market situation will be very complicated. In addition, the weather situation will also be unpredictable. Therefore, the Ministry of Industry and Trade will carefully consider the issue of reducing the total volume allocated to enterprises. “The Ministry of Industry and Trade will seriously listen and carefully study the proposals of enterprises so that in any context, we still achieve the highest goal of ensuring enough gasoline and oil supply to meet the domestic demand,” emphasized Mr. Chinh.