Discontinuing A92 gasoline, worrying about shortage of A95 gasoline

From January 1, 2018, all A92 gasoline will be discontinued; only E5 bio-fuel and A95 gasoline will remain on the market. However, many businesses and experts are worried that there will be a shortage of A95 gasoline for the market. More worryingly, there may be a monopoly in the supply of raw materials for processing bio-fuel, causing consumers to suffer.

At this time, the whole country has almost only one enterprise supplying raw materials for blending E5 bio-fuel.

Worried about A95 gasoline shortage

The Ho Chi Minh City Department of Industry and Trade recently sent a report to the authorities stating that currently, domestic raw material factories are closed and operating at a standstill due to unstable input and output sources of raw materials, and unstable supply of ethanol used to blend E5 bio-fuel.

As a result, the cost of purchasing, processing, and high loss rate during storage leads to high ethanol production costs, leading to high price of E5 biofuel.

On the other hand, the world oil price is currently stable after increasing since November 2016 and has a downward trend. Therefore, many oil trading enterprises are promoting import and storage, exporting A92 and A95 mineral gasoline to consume more effectively than E5 bio-fuel.

From January 1, 2018, all A92 gasoline will be discontinued.

"The pilot implementation of E5 bio-fuel business in some provinces and cities is not synchronous and timely, significantly affecting the distribution of E5 bio-fuel" - Ho Chi Minh City Department of Industry and Trade assessed.

Therefore, this agency believes that in the case of replacing 100% of A92 mineral gasoline with E5 bio-fuel, consumers will tend to switch to using A95 gasoline, leading to increased demand for A95 gasoline, affecting supply.

Sharing the same opinion, a representative of Cu Chi Industrial and Commercial Development Investment Joint Stock Company predicted that when A92 gasoline is eliminated, customers will switch to using A95 more, and the demand for this product will increase.

Similarly, Chairman of the Vietnam Petroleum Association Phan The Rue also commented that although E5 gasoline is being sold alongside A92 mineral gasoline, consumers are still not really interested in this type of gasoline as the consumption rate of E5 gasoline in the market only reaches 9% of the total consumption of mineral gasoline.

Therefore, the complete elimination of mineral gasoline in early 2018, replaced by fuel stations providing E5 biofuel, can help consumers somewhat accept the switch to using this fuel. But it will be inevitable that a part of users will completely switch to A95 gasoline, especially cars.

This means that without drastic preparation, there may be a shortage of A95 gasoline.

Monopoly, users will suffer

Petrolimex Group Deputy General Director Tran Ngoc Nam affirmed that they will strive to meet the supply of A95 gasoline if the demand for this type of gasoline increases when A92 gasoline is eliminated. "This is a product that the group has been trading for many years, so we are able to meet the supply," Mr. Nam confidently said.

However, many opinions are concerned that there may be a monopoly in ethanol supply. Because E5 gasoline depends heavily on ethanol supply and to replace all A92 gasoline with E5 gasoline, each year more than 275,000 m3 of ethanol raw material is needed.

Meanwhile, currently, Tung Lam Company Limited is the main and almost sole unit supplying ethanol for biofuel blending for petroleum terminals nationwide with a production capacity of only nearly 200,000 m3 of ethanol/year, meaning there is still a shortage of about 75,000 m3 of ethanol raw materials.

When there is almost only one company supplying the whole country, it is difficult to avoid "one market" situation, causing the E5 gasoline market to not have as many sources of supply as A92 gasoline, leading to the possibility of monopoly and consumers being disadvantaged.

To break the monopoly and not be dependent on one ethanol supply source, it is necessary to put biofuel factories in the Central region and Binh Phuoc back into operation to act as a counterweight. Unfortunately, according to the Vietnam Biofuel Association, these factories are currently in a state of suspension, awaiting approval to restart.

Based on the above reality, the representative of the Department of Industry and Trade of Ho Chi Minh City said that in case of the simultaneous termination of A92 gasoline, there needs to be a plan and a specific roadmap for investment in tanks, import, and reasonable reserve of A95 mineral gasoline. Thereby avoiding supply shortages, affecting the market.

According to Ho Chi Minh City Law Newspaper