Who benefits from biofuels?

While biofuel plants have started up but lack output, distributors are showing little interest, except for those businesses that are subsidiaries of the Vietnam Oil and Gas Group.

To date, only 3 out of 19 major petroleum companies nationwide are selling E5 gasoline, with 170 out of 13,000 gas stations and dealers across the country. Why is a major policy, backed by the Government and relevant ministries, being met with indifference from businesses and consumers?

Who benefits from this game?

Vietnam National Petroleum Group (Petrolimex) – the leading petroleum distributor accounting for up to 50% of the country's petroleum market share – has shown considerable caution and reluctance regarding the popularization of E5 gasoline. Since 2010, Petrolimex has sent numerous documents to relevant authorities, citing the lack of necessary conditions for the widespread distribution of E5 gasoline, particularly the lack of mechanisms and policies to introduce the new product to the market.

Petrolimex, which holds 50% of the national fuel market share, remains hesitant about the policy of popularizing E5 gasoline.

According to an expert in this field, given the recent fluctuations in gasoline prices, consumers are particularly interested in the price of E5 gasoline, wondering if it will be lower than traditional A92 gasoline. To invest in the E5 gasoline business, fuel distributors must incur costs for tanks, transportation, and blending plants to store the E5 product. Furthermore, the agency costs for E5 gasoline are currently much higher than those for conventional gasoline, all of which must be factored into the selling price.

For example, Petrolimex's preliminary calculations show that with investment across its entire E5 gasoline business system, including over 60 fuel depots, more than 2,000 directly owned stores, and over 4,000 dealers and general agents, it would require investment in new construction and renovation of E100 and E5 storage tanks, investment in blending technology, dispensing and pumping systems, installation of new storage tanks at gas stations, and investment in fuel pump equipment, etc.

The total investment for the two phases (2014-2015 and 2016-2017) amounts to 500 billion VND. In the worst-case scenario, Petrolimex estimates it could incur losses exceeding 1,500 billion VND. PV Oil also incurred losses during the trial supply phase and is proposing a mechanism to compensate the government for losses incurred from selling bioethanol at a lower price than traditional gasoline. Without a pricing mechanism, E5 gasoline will not be able to enter the market.

Furthermore, the supply of E100 and the selling price of ethanol depend primarily on the investment level of factories and input materials, making it difficult to control. If ethanol prices exceed the permitted threshold, it will drive up the cost of E5. "Does this indicate that the regulatory authorities are being passive in terms of policy?"

"The hasty introduction of E5 to the market does not benefit the main distributors (due to large investments and the lack of a mechanism to compensate for losses), or consumers (the lack of a mechanism to encourage its use)... it can only be understood as an attempt to reduce losses for biofuel factories that have already invested but now have no market," a biofuel expert affirmed.

Hesitant to embrace biofuels

From September 1st, Quang Ngai will be the first province in the country to completely replace A92 gasoline with E5 RON 92 bioethanol fuel, ahead of the government's roadmap. Mr. Nguyen Hoai Giang, Chairman of the Board of Directors of Binh Son Refinery and Petrochemical Company (BSR), the unit supplying E5 RON 92 gasoline to distributors in the province, stated that although BSR currently has sufficient capacity to meet the demand for E5 gasoline in Quang Ngai, the plant is having to import raw materials from the Central Highlands and Southeast regions because the province's domestic supply does not meet the required quantity and quality standards.

To meet its input demand of 240,000 tons of dried cassava tubers per year, BSR is piloting a 2,000-hectare cassava project in Quang Ngai, providing support in terms of seeds and fertilizers, and purchasing the crop at market prices from farmers. However, this raw material area is also at risk of being compromised due to price manipulation by Chinese traders.

Regarding gasoline prices, while awaiting policy changes, BSR is currently selling E5 RON 92 gasoline at the same price as Mogas A92 gasoline. Mr. Giang proposed that the Government prioritize E5 gasoline through tax breaks or subsidies so that each liter of bio-gasoline is priced 300-400 VND/liter lower than regular gasoline, and later 600-700 VND/liter. In addition, it is necessary to intensify the promotion of the benefits of bio-gasoline to change people's mindset. Currently, 150 gasoline and oil retail outlets in Quang Ngai are busily preparing for this "restructuring."

BSR has been using E5 gasoline for its company vehicles and employees' private cars for the past two years, but people are still wondering if the new gasoline will damage their engines?

Additional revenue will be collected from conventional gasoline to offset the price of biofuel.

The government remains committed to the roadmap for introducing biofuels to the market as per Decision 53/QD-TTg; allowing the continued business and supply of mineral gasoline (RON 95) alongside biofuels (E5, E10) according to a gradual and appropriate reduction schedule. Regarding pricing, the Ministry of Finance, in coordination with the Ministry of Industry and Trade, is tasked with developing a plan to establish a Biofuel Development Encouragement Fund and create a mechanism to collect additional revenue from mineral gasoline to subsidize biofuels, creating a reasonable price difference to encourage users.

According to what I read in the newspaper.