Oil prices surges due to political conflict to put pressure on inflation

VCN - Pressure on the rising inflation trend occurs amid strong fluctuations in market prices due to ongoing geopolitical tensions, so coordination in management is needed.
Oil prices surges due to political conflict to put pressure on inflation
The surge in oil price will affect other products. Illustrative photo.

Strong impact on commodity prices

Currently, the financial market suffers from many impacts from the conflict in the Middle East region, causing the surge in prices of currencies and goods such as USD, gold or oil.

According to a report from the Ministry of Finance, crude oil prices on the world market in September 2023 tend to increase compared to August. In September 2023, Brent oil prices on average grow about 6%, WTI oil prices at about 6.6% compared to the average in August 2023.

In addition, Dr. Bui Duy Tung, economics lecturer, RMIT Vietnam University, oil prices increased 4% immediately after Hamas' attack on Israel. Although Israel is not a major oil producer, its geopolitics and potential for conflict escalation have made it the focus of interest in the oil market. Furthermore, the Middle East, as one of the world's largest oil sources, is always the focus of volatility when there is conflict.

He also said that the war not only increased oil prices due to concerns about supply disruptions but also voiced concerns about its impact on global economic indicators.

The USD price has also been on an upward trend, the DXY index (an index measuring the strength of the USD with major currencies) has continuously been at 106 to over 107 points from the beginning of October. This makes the USD and VND exchange rates rise in line with international trends. Currently, the lowest USD buying price is at 24,225 VND/USD, the highest buying price is at 24,300 VND/USD. On the selling side, the lowest selling price is at 24,620 VND/USD, the highest selling price is at 24,645 VND/USD.

In addition, SJC gold price also hit more than 70 million VND/tael on the selling side - the highest since the beginning of the year. The difference between world gold price and domestic gold price is up to 14.4 million VND/tael.

Plan to minimize negative impacts needed

The situation has created a lot of pressure on inflation. According to the World Bank’s macroeconomic report released October 2023, headline inflation has continued to soar since June so it needs to be closely monitored.

Regarding petroleum prices, the Ministry of Industry and Trade forecasts that the average world crude oil price in the fourth quarter will go up compared to the previous three quarters because Saudi Arabia and Russia both extend supply cuts until the end of the year. US commercial crude oil inventories continue to decline. In addition, the recent increase in conflict in the Middle East is also a factor putting pressure on petroleum prices.

According to Dr. Bui Duy Tung, high oil prices not only affect freight prices but also pushed up the prices of other products, such as food prices, thereby raising inflation pressure. Vietnam depends on oil imports, so the country will face more difficulties.

The International Monetary Fund (IMF) also issued a warning to Vietnam about the risk of exchange rate fluctuations, especially when interest rates have been revised down. When oil prices go up, the need for foreign currency to import oil also increases, which can push down the value of the Vietnamese Dong. A weaker currency may create a pass-through effect to inflation, as prices of imported goods, including oil, increase in domestic currency terms.

In such a context, Dr. Bui Duy Tung said that the devaluation of the currency may affect the State Bank's (SBV) efforts in control inflation, so it may suffer from difficult decisions on monetary policy and exchange rate management to maintain economic stability. One of the solutions that can be considered is to shorten the oil price adjustment time.

In response to the situation, the SBV has implemented policies to stabilize the monetary market, contributing to controlling inflation, including continuing to issue T-bills worth VND 112,000 billion in the first half of October and over VND 205,000 billion in 17 consecutive issuance sessions.

According to a report from the Ministry of Finance, in the first 9 months of 2023, thanks to flexible monetary policy management, despite of increasing trend, the exchange rate on the market is much lower than some other currencies in the region. The SBV has bought back about US$6.63 billion of foreign currency from credit institutions to add the state foreign exchange reserves.

Therefore, the Ministry of Finance believes that it is necessary to implement proactive, flexible, timely, effective monetary policy, and closely coordinate with other fiscal and macro policies; manage exchange rates in accordance with the situation, control credit growth under the set orientation.

The Ministry of Finance also requested ministries, sectors and localities to be proactive in reviewing plans to adjust prices of state-managed goods. At the same time, there needs to be a plan to minimize the negative impacts on the poor and vulnerable groups from the revision of essential goods prices.

By Huong Diu /Hoang Loan

Related News

Regulating prices and controlling inflation in the "variables"

Regulating prices and controlling inflation in the "variables"

VCN - Unpredictable developments will certainly have a major impact on the price market as well as domestic inflation control in 2024. Therefore, successful results and solutions from 2023 will be a "pedestal" for 2024.
Proposing to have information sharing mechanism in price management

Proposing to have information sharing mechanism in price management

VCN - In the draft Decree detailing and implementing measures for a number of articles of the 2023 Price Law, the Ministry of Finance has proposed many specific tasks for price stabilization as well as market price analysis and forecasting.
Pressure on price level remains, it is necessary to be proactive and flexible in management plans

Pressure on price level remains, it is necessary to be proactive and flexible in management plans

VCN - To carry out the set tasks, the Ministry of Finance said that price management in 2024 needs to ensure good control of inflation, while continuing to removing difficulties for production and business and people's lives.
Dr. Can Van Luc: Don’t worry much about inflation in 2024

Dr. Can Van Luc: Don’t worry much about inflation in 2024

VCN - Dr. Can Van Luc, member of the National Financial-Monetary Policy Advisory Council, has predicted, in 2024, Viet Nam can totally snatch every potential resource to stimulate growth regardless of obstacles because inflation can be well controlled under the set goals. At the same time, it is necessary to increase the autonomy and resilience of the economy in a fragile context from outside, including businesses and localities.

Latest News

PM Pham Minh Chinh’s Australia trip “incredibly important”: Ambassador

PM Pham Minh Chinh’s Australia trip “incredibly important”: Ambassador

Australian Ambassador to Vietnam Andrew Goledzinowski has emphasised the significance of the upcoming trip to Australia by Prime Minister Pham Minh Chinh in an interview granted to the Vietnam News Agency (VNA).
SOEs asked to play more active role in implementation of strategic breakthroughs

SOEs asked to play more active role in implementation of strategic breakthroughs

Prime Minister Pham Minh Chinh on March 3 called on state-owned enterprises (SOEs) to engage more intensively in the implementation of strategic breakthroughs regarding institutional perfection, personnel training and infrastructure development.
Positive socio-economic results recorded so far: Government meeting

Positive socio-economic results recorded so far: Government meeting

Vietnam saw a continuous recovery trend and positive socio-economic results across all fields in February and the first two months of this year, heard the Government regular meeting held in Hanoi on March 2 under the chair of Prime Minister Pham Minh Chinh.
Vietnam to join conference on global agricultural supply chain connection

Vietnam to join conference on global agricultural supply chain connection

Vietnamese businesses operating in agriculture will attend the Agricultural Supply Chain Asia conference (ASCA) co-hosted by the US Grains Council, the US Wheat Associates, and the US Soybean Export Council from March 18 – 20, according to the Vietnam Business Council for Sustainable Development (VBCSD) under the Vietnam Chamber of Commerce and Industry (VCCI).

More News

Vietnam - most investor friendly country in ASEAN: US paper

Vietnam - most investor friendly country in ASEAN: US paper

Vietnam is the most investment worthy place in ASEAN, based on valid and practical grounds where improved economic diversification, international integration, reformed investment legislation and good economic policy must be counted, according to an article recently published on the US’s mondaq.com.
Việt Nam has advantages in exports to Europe, America

Việt Nam has advantages in exports to Europe, America

Demand in the global market, including Europe and America, is gradually recovering because inflation had begun to subside since the end of 2023.
Việt Nam moves up significantly in economic freedom ranking while global average falls

Việt Nam moves up significantly in economic freedom ranking while global average falls

Việt Nam has the opportunity to become one of Asia’s leading economic nations if the country continues on the path of market economy reforms.
The Prime Minister instructed state-owned enterprises to exceed assigned business targets

The Prime Minister instructed state-owned enterprises to exceed assigned business targets

VCN - Prime Minister Pham Minh Chinh has just signed Directive 07/CT-TTg on innovating governance, improving production and business efficiency and strongly promoting investment and development of corporations and state-owned enterprises (SOEs).
Vietnam, Japan cooperate in IP protection, counterfeit goods prevention

Vietnam, Japan cooperate in IP protection, counterfeit goods prevention

Vietnamese officials at a workshop in Hanoi on February 28 called on Japan to continue its support to Vietnam in protecting and enforcing intellectual property (IP) rights, making IP a driving force for economic development.
High, quality growth key to breaking out middle-income trap

High, quality growth key to breaking out middle-income trap

The next several years of the decade will play a decisive part in transforming Vietnam into an industrialised nation, achieving its goal of sustainable development and breaking into the world's high-income group.
Government law-building session to discuss 11 contents

Government law-building session to discuss 11 contents

Prime Minister Pham Minh Chinh chaired the Government’s law-building session for February in Hanoi on February 27, during which participants will give ideas on five bills, five law-building proposals and a law, and ordinance building programme.
Ministry announces Vietnam"s digital infrastructure plan for 2021-2030

Ministry announces Vietnam"s digital infrastructure plan for 2021-2030

Comprehensive plans are in place to rejuvenate and advance Vietnam's information and communications infrastructure.
Satellite cities a focal point for new development in metropolises

Satellite cities a focal point for new development in metropolises

Strongly developing satellite cities for some metropolises is among the targets specified in the Prime Minister’s recent decision on the strategy to develop the construction sector by 2030, with orientation towards 2045.
Read More

Your care

Latest Most read
PM Pham Minh Chinh’s Australia trip “incredibly important”: Ambassador

PM Pham Minh Chinh’s Australia trip “incredibly important”: Ambassador

Australian Ambassador to Vietnam Andrew Goledzinowski has emphasised the significance of the upcoming trip to Australia by Prime Minister Pham Minh Chinh in an interview granted to the Vietnam News Agency (VNA).
SOEs asked to play more active role in implementation of strategic breakthroughs

SOEs asked to play more active role in implementation of strategic breakthroughs

Prime Minister Pham Minh Chinh on March 3 called on state-owned enterprises (SOEs) to engage more intensively in the implementation of strategic breakthroughs regarding institutional perfection, personnel training and infrastructure development.
Positive socio-economic results recorded so far: Government meeting

Positive socio-economic results recorded so far: Government meeting

Vietnam saw a continuous recovery trend and positive socio-economic results across all fields in February and the first two months of this year, heard the Government regular meeting held in Hanoi on March 2 under the chair of Prime Minister Pham Minh Chinh.
Vietnam to join conference on global agricultural supply chain connection

Vietnam to join conference on global agricultural supply chain connection

Vietnamese businesses operating in agriculture will attend the Agricultural Supply Chain Asia conference (ASCA) co-hosted by the US Grains Council, the US Wheat Associates, and the US Soybean Export Council from March 18 – 20, according to the Vietnam Business Council for Sustainable Development (VBCSD) under the Vietnam Chamber of Commerce and Industry (VCCI).
Vietnam - most investor friendly country in ASEAN: US paper

Vietnam - most investor friendly country in ASEAN: US paper

Vietnam is the most investment worthy place in ASEAN, based on valid and practical grounds where improved economic diversification, international integration, reformed investment legislation and good economic policy must be counted, according to an article recently published on the US’s mondaq.com.
Mobile Version