The fifth consecutive increase in gasoline prices in the past two months has and will put significant pressure on inflation.

Along with world oil prices, domestic gasoline prices have recently been under pressure to increase. Since 3 p.m. on June 4, the price of RON 92 gasoline has increased by VND680 to a maximum of VND16,509 per liter. This is the fifth consecutive time gasoline prices have been adjusted upward.

Continuous increase in gasoline prices puts pressure on inflation

According to the General Statistics Office, along with fluctuations in gasoline prices and prices of many other commodities, the consumer price index (CPI) has increased continuously over the past 4 months. In May 2016 alone, the CPI increased by 0.54% compared to the previous month, the highest level in the past 5 years.

According to the assessment of the Ministry of Planning and Investment, inflation in the first 5 months of the year was low, but still has the potential to increase, especially as the prices of crude oil and food and agricultural products in the world market continue to increase.

Crude oil prices have increased by 80% compared to the lowest price in January 2016 and may increase even higher in the coming time. This will impact the increase in prices of most materials and supplies, pushing up production costs and prices, putting pressure on the output price level.

In fact, the CPI in our country is greatly affected by the price of gasoline. Before mid-March 2016, gasoline prices were continuously adjusted down, helping to keep the CPI low. For example, with the CPI in March, thanks to the gasoline price being adjusted down by 960 VND/liter on February 18, 2016, the price index of the transportation group decreased by 3.64%, contributing to a decrease in the overall CPI in March of about 0.34%.

However, after that, the world oil price changed direction and increased, causing the domestic oil price to be adjusted accordingly. The increase of 1,190 VND/liter for gasoline and 290 VND/liter for diesel on March 21, 2016 and April 5, 2016 also led to the fuel price index in April increasing by 3.83% compared to the previous month, contributing to an increase of about 0.16% in the overall CPI...

Gasoline prices continued to increase throughout April and May. Gasoline prices increased by VND640/liter and diesel increased by VND1,150/liter on April 20, 2016 and May 5, 2016, leading to a 5.15% increase in the fuel price index compared to the previous month, contributing to an overall CPI increase of about 0.21%. The transportation group alone increased by 2.39%.

From 3:00 p.m. on June 4, the price of RON 92 gasoline increased by VND680 to a maximum of VND16,509 per liter. This is the fifth consecutive time in the past two months that gasoline prices have been adjusted upward. According to a forecast by a leader of the General Statistics Office, the gasoline price increase on June 4 and previous increases will put pressure on the price index in June and it is likely that the price index in June will continue to increase sharply.

Concluding at the meeting of the Price Management Steering Committee on May 23, regarding petroleum products, Deputy Prime Minister Vuong Dinh Hue directed the Ministry of Industry and Trade to preside over and coordinate with the Ministry of Finance and relevant agencies to continue to manage petroleum prices according to the market mechanism with State regulation as prescribed in Decree No. 83/2014/ND-CP; develop scenarios for managing petroleum prices according to fluctuations in world petroleum prices, manage prices in combination with using the petroleum price stabilization fund to stabilize the price of this product to curb price increases affecting inflation.

Not only under pressure from gasoline prices, many other factors are putting pressure on inflation in 2016.

According to the forecast of the General Statistics Office, from now until the end of 2016, the price of medical services will be adjusted again in July 2016, the price of educational services will be adjusted in September 2016, accordingly, the CPI index in December this year will have a fairly high increase, most likely exceeding 5%, however, the CPI index compared to the average of the same period will be controlled at 5%.

Therefore, the General Statistics Office believes that the Government needs to continue to direct the Ministry of Finance and the Ministry of Industry and Trade to closely monitor price and market developments, especially for essential goods (rice, gasoline, iron and steel, fertilizers, etc.) when they increase again, which will put pressure on inflation control, while strengthening market inspection and control. The Government and some ministries need to consider the time to adjust the price of some essential goods to avoid causing a widespread psychological impact on the CPI.