What is the base price structure of petroleum in Vietnam?

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The current base price of petrol and oil is calculated on four factors. Photo: Nguyen Thanh.

Global petrol and oil prices

Currently, the global petrol and oil prices in the base petrol and oil price formula are determined as the price of petrol and oil products traded on the Singapore market (by Platts news agency). In the petrol and oil base price structure, the cost of global petrol and oil prices (stated in the average Platts price) accounts for about 65% for petrol and about 80% for diesel oil (calculated in the operating period of September 12, 2022). This factor plays a decisive role in managing domestic petrol and oil base prices and is an objective factor beyond the controllability of petrol and oil price management. When the global petrol and oil price increases, the proportion of this factor in the base price of petrol and oil also increases.

Standard costs and standard profits

The standard costs to calculate the base price of petrol and oil account for 5-9% for petrol and about 5% for diesel oil (calculated at the operating period on September 12, 2022), including the cost of bringing petrol and oil from foreign countries to Vietnam, domestic premium; the cost of bringing petrol and oil from the refinery plants to the port; regulated operating cost. In addition, the standard profit (for calculating the base price of petrol and oil only) accounts for about 0.9-1.2%. The standard costs are reviewed and determined according to the actual developments of petrol and oil trading activities, ensuring accurate, sufficient and reasonable calculation, validity and conformity with the petroleum trading of critical traders.

Amount of funding for and use of Price Stabilization Fund

According to current regulations, the amount of funding for the Price Stabilization Fund is flexibly managed in line with reality at the time of petrol and oil price management. The expense covered by Price Stabilization Fund is considered when the base price is higher than the current retail price or the increase in petrol and oil prices affects the social-economic development and people's lives.

Petrol and oil related-taxes

Currently, the taxes applicable to petrol and oil products and included in the base price include import tax, excise tax, environmental protection tax and value-added tax. However, the Law on Fees and Charges has no regulations on charging petrol and oil.

Officially reducing import duty of petroleum products to 10%

Compared with many countries in the world, the tax proportion in the base price of petroleum in Vietnam is still lower than the general average, especially after the environmental protection tax rate was revised according to Resolution 20/ 2022/UBTVQH15 of the UBTVQH. The tax base price in many countries is mainly 40% - 55% for petrol and 35% - 50% for oil (except for some countries with large oil reserves). Meanwhile in Vietnam, with the environmental protection tax rate being reduced according to Resolution 20/2022/UBTVQH15, the tax proportion in the base price of petrol and oil is about 20.14% for E5RON92; about 22.59% for RON95 and about 11.40% for diesel (calculated at the operating period on September 12, 2022).