How will Vietnam cope with falling oil prices?

01:59 PM @ Tuesday - 11 November, 2014
VietNamNet Bridge – While the Ministry of Industry and Trade (MOIT) is considering possible measures to cope with sharp falls in oil prices on the world market, the government does not plan to adjust the state budget collection plan.

MOIT Minister Vu Huy Hoang told the local press on the sidelines of the ongoing National Assembly session that the ministry was considering several scenarios to cope with oil price fluctuations to optimize profits from oil exports and petrol imports.

Hoang said that crude oil prices had recently fallen to very low levels. In principle, once the crude oil price falls, the prices of finished products will also decrease, which means that consumers will be able to buy petrol products at lower prices. Seventy percent of the products consumed domestically are imports.

However, he conceded that with the oil price plunging Vietnam would earn less money from oil exports. In 2013, the oil price climbed to over $100 per barrel,and it is now hovering around $75-76 per barrel.

“With that price level, we make a very modest profit,” Hoang said.

Hoang said there were two measures to cope with oil price fluctuations. First, it is necessary to ensure oil storage. The government has instructed relevant ministries and branches to regulate oil production and export.

If the oil price falls, Vietnam will cut export volume, while it will export more when the price increases.

“This is the best way for Vietnam to both ensure energy security and optimize profits,” he said.

Second, Vietnam will have to improve forecasting to determine reasonable output. The output will be different at different times of the year, depending on world prices. Forecasting is also done by other oil exporters.

As planned, the National Assembly will discuss the 2015 budget in a few days. Phung Quoc Hien, chair of the National Assembly’s Finance and Budget Committee, admitted that the oil price decrease should be considered when figuring out the budget.

Budget estimates submitted by the government to the National Assembly show an economic scenario with an estimated oil price of $100 per barrel, according to Hien.

“Therefore, if the oil price falls to $70, this would affect the budget,” Hien said, adding that oil exports make up one-tenth of total state revenue.

However, Hien said the government has no intention of adjusting the plan on state budget collection.

“The government and the National Assembly’s Finance and Budget Committee both believe that there is no need to adjust the plan right now, because we need to keep more time to watch the oil price performance,” Hien said.

“If you check the oil prices in previous years, you will see that prices were always above $100 per barrel,” he added.

In 2014, Vietnam targets revenue of VND80 trillion from crude oil.
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