Brent crude November futures went up 3 US cents to $88.70 a barrel at by the middle of last week, while US West Texas Intermediate crude October futures climbed 9 US cents to $85.70 a barrel.

Fuel price climb projected to carry on into next year, illustration photo/ Source: freepik.com

As Vietnam’s fuel market largely depends on the global market, the domestic market last week saw a climb in fuel prices, also the 15th increase since early this year, by 1.3-1.8 US cents. It is expected that the price will continue rising in the coming months as there is no signal of reduction in the global oil market.

Crude oil prices have been rising sharply throughout the world, and it has raised fresh concerns about the impact it will have on the world economy, especially as many countries continue to grapple with high inflation. Enterprises across various industries may experience rising operational expenses, affecting profit margins and potentially leading to job cuts.

According to Swiss-based multinational energy company Vitol Group, oil prices could reach a $100 per barrel before the end of the year as global demand is set to reach record levels amid constrained supply.

One of the key drivers of a high hike in oil price this year is China’s economic recovery. According to the World Bank, nearly half of the growth in oil consumption in 2023 is expected to come from China. Goldman Sachs has also estimated that China’s reopening will add one million barrels per day to global demand (or about 1 per cent of world consumption), putting an extra $5 a barrel to oil prices.

All these oil-related factors will push inflation up, including that in Vietnam this year, when the country wants to rein in the rate at about 4.5 per cent.

Vietnam’s consumer price index (CPI) in the first eight months of this year increased 3.1 per cent on-year, largely driven by a rise in the prices of fuel, rice, and housing services, said the General Statistics Office (GSO).

In August, fuel prices increased 10.62 per cent as compared to December 2022 because in the first eight months of 2023, the fuel prices were revised 24 times, leading to a rise of 13 US cents per litre of A95 petrol, 14 US cents per litre of E5 petrol, and 3 US cents per litre of diesel.

What is more, according to the GSO, Vietnam’s efforts to bring inflation under control this year goal will also be threatened by a potential hike in electricity prices.

In the first eight months of 2023, the electricity price of households ascended by nearly 4 per cent, causing a rise of 0.13 per cent in CPI. In May, Vietnam Electricity (EVN) increased the retail power price by an average 3 per cent.

However, the group said that even with this increase, it will still continue suffering from losses. Thus, it has proposed an expansion in the price once again this month.

The Ministry of Industry and Trade, based on proposals from EVN, has made a draft regulation for shortening the time for adjusting electricity prices from the existing six months to only three months.

Any upcoming adjustment of the average electricity price to a specific level would be subject to the prime minister’s direction.

According to the World Bank, Vietnam’s CPI is expected to rise slightly from an average 3.1 per cent in 2022 to an average 3.5 per cent for 2023. It will moderate to 3 per cent in 2024 and 2025 based on the expectation of stable commodity and energy prices in 2024.

Global analysts FocusEconomics meanwhile expects Vietnam’s inflation to average 3.1 per cent for this year, and 3.2 per cent in 2024.