The Oil and Gas Industry’s Plight: Navigating Turbulent Times

Sharing with Tiền Phong on June 27th, Mr. Nguyễn Xuân Thắng, Director of Âu Hải Phát Gas and Oil Company (Lâm Đồng), revealed that retail businesses have been struggling for the past two weeks due to significantly low discounts, even reaching 0 VND on some days, resulting in substantial losses for the companies, ranging from 700 to 1,000 VND per liter.

According to Mr. Thắng, the most frustrating aspect for retail businesses at present is that their proposals regarding profit-sharing norms and control over the discounts offered by the wholesale companies have fallen on deaf ears at the Ministry of Industry and Trade. “For the past two weeks, the discounts have been extremely low, even reaching 0 VND, causing significant losses for the companies. However, just yesterday, after a price increase of 260-280 VND, the wholesalers immediately pushed the discounts up to unload their inventory. Why didn’t they maintain a discount of 1,000 VND per liter instead of reducing it to almost nothing? Every time there’s a price fluctuation, the wholesalers manipulate the discounts to their advantage. After the price increase, they offer higher discounts, leaving the retailers unable to cope as weekend sales are typically lower. This ‘playing both sides’ tactic has been going on for years without any intervention from the Ministry of Industry and Trade,” Mr. Thắng lamented.

“Gas and oil companies have endured significant losses since 2021 due to the management style of the regulatory body. At this point, I just want to exit this industry as soon as possible because our suggestions for the draft decree on gas and oil, as well as the challenges faced by businesses, have fallen on deaf ears at the Ministry of Industry and Trade, which is the governing body. Many of my colleagues in the industry have also decided to sell their gas stations, which they had dedicated their lives to building, and move on to high-tech agriculture because they can no longer bear the pressure of prolonged losses, the inability to take breaks, the mandate to stay open even when running out of stock, and the constant risk of being wrongfully accused.”

Director of a gas and oil company in the southern region

The director of a large gas and oil company in the north confirmed that gas and oil businesses are currently facing losses due to the continuous decline in discounts offered by the wholesalers since June 14th. Despite the recent retail price adjustment, the significant drop in discounts has left companies unable to cover their costs, especially with the added expense of sourcing products from locations over 300km away. With a discount of 0 VND and additional transportation and operational costs, companies are facing substantial losses. “It’s embarrassing to be called a gas and oil company owner when our annual income is less than that of a convenience store. It’s exhausting,” they added.

“The drastic reduction in discounts, coupled with limitations on sales volume imposed by wholesalers and distributors, has resulted in estimated losses of 900-1,200 VND per liter of sold gas and oil.”

Representative of a gas and oil company

The director of a gas and oil retail company in Hanoi shared that June 24th was the most challenging day, with discounts at many warehouses plummeting to unprecedented lows, causing significant losses for the business. To ensure supply continuity and avoid penalties from authorities, he had no choice but to accept a negative discount of 30 VND per liter at the warehouse. Including transportation costs of 250 VND per liter and other expenses, the company incurred a loss of 1,100 VND for every liter of gas sold. Notably, with such volatile global oil prices, the management bodies, namely the Ministry of Industry and Trade and the Ministry of Finance, should closely monitor the market, heed the concerns of businesses, and promptly advise on price adjustments to prevent losses due to steep discount reductions.

“On June 24th, the global oil price suddenly dropped by 2.99% to 66.46 USD per barrel, causing uncertainty among wholesalers, who responded by slashing discounts, resulting in losses of over 1,000 VND per liter of sold gas. Despite past experiences with abnormal global price fluctuations, the authorities have failed to learn from these lessons and make timely adjustments,” the director shared.

A representative of a gas and oil company in the southern region expressed frustration over the continuous and drastic reduction in discounts since the beginning of the week, leaving the company in a dire situation. According to this representative, the challenges faced by the gas and oil industry in recent years have been unprecedented. The crisis in 2022, caused by the Ministry of Industry and Trade’s management style, which led to supply disruptions, now risks repeating itself as continuous discount reductions leave companies unable to cover operational costs. To survive, the company has had to sell some of its gas stations and diversify into other businesses, such as pesticides, coffee, and real estate, to subsidize its gas and oil operations. Without these additional revenue streams, the company would have shut down long ago.