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

Sharing with Tiền Phong on June 27th, Mr. Nguyen Xuan Thang, Director of Au Hai Phat Gas and Oil Company (Lam Dong Province), 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. Thang, what frustrates retail businesses the most currently is that the Ministry of Industry and Trade has been turning a deaf ear to their proposals regarding profit-sharing norms and controlling the discounts offered by the wholesale companies. “For the past two weeks, the discounts have been extremely low, even reaching 0 VND, causing significant losses for us. However, right after yesterday’s price increase of 260-280 VND, the wholesalers immediately hiked their discounts to offload their stocks. Why didn’t they maintain a 1,000 VND per liter discount before? Every time there’s a price fluctuation, the wholesalers manipulate the discounts. After the price increase, they suddenly raise the discounts, leaving us retail businesses struggling to keep up, especially during weekends when 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. Thang lamented.

“Gas and oil businesses have been suffering significant losses since 2021 due to the management agency’s policies. 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 prolonged losses and the pressure of staying open, even when it means operating at a loss, and the unfair reputation we have to endure.”

Director of a gas and oil company in the Southern region

The director of a large gas and oil company in the North also confirmed that gas and oil businesses are facing losses due to the continuous decline in discounts offered by the wholesalers since June 14th. Despite the recent retail price adjustments, the significant drop in discounts has left companies unable to compensate for the costs of procuring stock from locations over 300km away. With a discount of 0 VND and additional transportation and operational expenses, companies are facing substantial losses. “It’s embarrassing to be called a gas and oil business owner when our annual income is less than that of a grocery store. It’s exhausting,” they shared.

“The discounts have been drastically reduced, and the wholesalers and distributors have also restricted our sales volume. With the sharp decline in discounts over the past two weeks, we estimate a loss of 900-1,200 VND per liter of sold gas and oil.”

Representative of a gas and oil company

According to the director of a gas and oil retail company in Hanoi, June 24th was the most challenging day as the discounts at many warehouses plummeted, resulting in significant losses for the business. To ensure supply continuity and avoid penalties from authorities, he had to reluctantly 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 per liter after procuring the stock. Notably, with such volatile global oil prices, the management agencies, 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 for companies due to declining discounts.

“For instance, 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 for retail businesses. Despite past experiences with abrupt global price changes, the authorities have failed to learn from them,” the director shared.

A representative of a gas and oil company in the Southern region also expressed frustration over the continuous decline in discounts since the beginning of the week, leaving them with no choice but to endure losses. 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 approach, which led to supply disruptions, is now at risk of repeating itself as the continuous decline in discounts leaves companies unable to cover operational costs. To survive, the company has had to sell some of its gas stations and diversify into businesses like pesticides, coffee, and real estate investments to subsidize its gas and oil operations. Without these additional revenue streams, the company would have shut down long ago.