Companies calculate the price themselves, but according to government-published costs.

The new pricing mechanism for gasoline and oil in the Draft Decree on Petroleum Business is one of the aspects particularly highlighted by industry businesses. This also constitutes the majority of the feedback from the Vietnam Chamber of Commerce and Industry (VCCI) sent to the Ministry of Industry and Trade.

Under the Draft Decree, businesses will decide gasoline and oil prices, but not exceed the ceiling price. This ceiling price is calculated based on the principle of adding costs, including source costs, standard business costs, standard profits, and taxes.

Thus, under the proposed mechanism, the government will publish component costs, and businesses will then calculate the ceiling price themselves, rather than the current system where the government announces the ceiling price.

“This mechanism only changes the form but not the essence of gasoline and oil price management,” VCCI quoted businesses’ feedback on the Draft Decree in the document sent to the Ministry of Finance.

Specifically, the pricing formula and component costs do not differ significantly from the current system. If this mechanism is implemented, the ceiling price will be very close to the total cost of supplying gasoline and oil.

VCCI believes that the vast majority of businesses will still have to sell at the ceiling price, with little chance of selling at lower prices to compete with other businesses. This means that the new mechanism does not offer a practical difference from the current system.

The Draft Decree adds a requirement for businesses to declare gasoline and oil prices to the government. According to the analysis, if most businesses sell gasoline and oil at the ceiling price, this price declaration procedure does not provide meaningful management oversight.

Moreover, many businesses are concerned that this mechanism will add unnecessary administrative procedures for both businesses and regulatory agencies. Furthermore, each business would need to declare prices weekly when the government publishes new source costs, leading to a large volume of procedures.

Proposal for a No-Ceiling Price Option

VCCI has proposed two options to the Ministry of Finance to address the issues with the gasoline and oil pricing mechanism in the Draft Decree.

VCCI recommends displaying prices in high, large, and clear positions so that passersby can see them without needing to turn into the gas station.

Option 1: Allow businesses to set their own selling prices, meaning no ceiling price. Along with this option, VCCI suggests implementing regulations for price transparency so consumers can make informed choices. This would involve displaying prices prominently in high, large, and clear locations so that passersby can see them without having to turn into the gas station. Alternatively, prices could be declared on a common online portal and made immediately public, allowing consumers to compare prices between gas stations online.

"Additionally, the government should regularly monitor market conditions to detect violations of the Competition Law, such as abuse of monopoly or dominant positions (unreasonably high prices, Article 27 of the Competition Law) or anti-competitive agreements (price-fixing collusion, Article 11 of the Competition Law)," VCCI recommends to the Ministry of Industry and Trade.

Option 2: VCCI proposes eliminating the price declaration procedure, or waiving this requirement when businesses sell at the ceiling price, as specified in the Draft Decree.

Allowing Distributors to Buy and Sell Gasoline and Oil Among Themselves

In the document sent to the Ministry of Industry and Trade, VCCI recommends allowing distributors to buy and sell gasoline and oil among themselves.

This recommendation has been repeatedly raised by VCCI after gathering opinions from businesses. However, the Draft Decree's regulations on the rights and obligations of gasoline and oil distributors still do not permit distributors to trade gasoline and oil with each other.

The drafters argue that allowing distributors to trade among themselves would lead to circular trading through multiple intermediaries, driving up gasoline and oil prices.

In response, VCCI contends that this argument is unfounded and contrary to market principles. Wholesale gasoline and oil market players tend to prefer purchasing from distributors who offer lower prices. If there is a source of cheap goods but the price increases due to multiple intermediaries, buyers will seek out the original source to obtain better prices. VCCI emphasizes that distributors who sell at higher prices will be pushed out of the market because they cannot compete with distributors and wholesalers offering lower prices.

Previously, Decree 83/2014/ND-CP and Decree 95/2021/ND-CP stipulated a 1:1 distribution system, meaning retailers had to depend on distributors. In this scenario, if a distributor raised the selling price, retailers could not switch to other suppliers and had to accept the higher price. However, since Decree 80/2023/ND-CP, retailers have been allowed to source products from multiple suppliers. The increased competition in the wholesale market has eliminated this issue.

Some opinions suggest that allowing distributors to trade among themselves might lead to inaccurate reporting of gasoline and oil reserves.

However, VCCI points out that the Draft Decree's regulations on reserve obligations apply only to wholesalers, not to distributors. Additionally, the Draft Decree includes a requirement for wholesalers to connect to the Ministry of Industry and Trade's network to report data on oil storage and inventory levels. Therefore, issues related to reserve data have been addressed.

This forms the basis for VCCI's belief that distributors should be permitted to buy and sell gasoline and oil among themselves.