A95 gasoline buyers are compensating for E5 gasoline

People think before choosing a type of gasoline at a gas station in Ho Chi Minh City. Photo: Huu Khoa

Unsustainable spread?

If on January 4, 2018, A95 gasoline price was 1,820 VND higher than E5 gasoline, then updated gasoline price list to March 14, the difference is only about 1,600 VND/liter.

In particular, the current price difference between E5 and A95 gasoline is mainly due to the gasoline stabilization fund.

A survey of the retail price management periods of gasoline by the Ministry of Finance and the Ministry of Industry and Trade since the beginning of 2018 shows that E5 gasoline has been continuously used from the price stabilization fund, while this item does not have to be allocated to the fund.

Specifically, in the operating period on January 4, 2018, E5 gasoline was increased from 546 VND/liter to 857 VND/liter for using the stabilization fund.

By February 3, the price stabilization fund for E5 had even increased sharply to VND1,141/liter.

Although it is being chosen by many people, during the previous management periods in early 2018, A95 gasoline was almost not spent on the price stabilization fund, only in the management period on February 3 did the price stabilization fund spend 400 VND/liter for A95.

An oil and gas industry expert said that prioritizing the price stabilization fund for E5 gasoline in the first phase may be necessary to encourage people to use it.

But this method is not sustainable because it will require taking out the reserve for sudden price increases for daily use.

Furthermore, E5 does not have to be withdrawn from the fund but is being released in large quantities, meaning that A95 gasoline users are having to compensate E5 users, while the price stabilization fund is not abundant, so resources will be limited.

A leader of Saigon Petro said that creating the difference between the two types of gasoline E5 and A95 mainly from extracting and using the price stabilization fund is unreasonable.

This person predicts that in April 2018, the base price of A95 gasoline is expected to be announced, the gap between these two products will be... less than 1,000 VND.

"E5 gasoline does not use the fund but is used for the fund, which means we have to use the fund contribution money from other petroleum products. That is unreasonable" - said a representative of Saigon Petro.

Businesses want to reduce, Ministry of Financewant to collect

According to a leader of a major petroleum enterprise, a draft to increase environmental protection tax has been proposed but only reduces environmental protection tax for E5 gasoline.

In fact, the tax rate for A95 gasoline is 4,000 VND/liter, while that for E5 gasoline is 3,800 VND/liter, a difference of only 200 VND/liter - too low, not encouraging the production and use of E5 gasoline.

Therefore, according to this leader, it is necessary to consider reducing the tax on E5 gasoline by another 500 VND/liter... to create a price difference of 2,000 - 2,500 VND/liter.

However, Mr. Pham Dinh Thi, Director of the Tax Policy Department - Ministry of Finance, confirmed that the environmental protection tax on E5 gasoline is actually only collected on mineral gasoline.

Specifically, currently 1 liter of E5 gasoline has 95% mineral gasoline and only 5% ethanol andIf the amount of ethanol increases, mineral gasoline will gradually only account for 80-90%... then the State will only tax the mineral gasoline portion.

"That's the logic. So reducing environmental protection tax on E5 biofuel as proposed by businesses is not feasible," said Mr. Thi.

According to Mr. Thi, the current environmental protection tax rate for mineral gasoline is 3,000 VND/liter, and for E5 gasoline it is 2,850 VND/liter.

With the proposed increase in environmental protection tax on mineral gasoline expected to be 4,000 VND/liter, the tax on E5 gasoline will be 200 VND/liter lower than that on fossil gasoline. Thus, E5 gasoline will be more profitable than mineral gasoline, but only 50 VND/liter more.

Mr. Cao Hoai Duong, General Director of Vietnam Oil Corporation, said that people are very interested in the price difference between products while the price of gasoline and oil includes many taxes and fees regulated by the State.

"If we want people to use more E5 gasoline, we have to create a big enough attraction between E5 and A95. This gap should be at 1,700 - 2,000 VND/liter, which is reasonable," Mr. Duong suggested.

Mr. Nguyen Duc Do, Deputy Director of the Institute of Finance and Economics (Academy of Finance),I think one of the issues that many people are concerned about with E5 is quality, so even if E5 gasoline is cheaper but the quality is not good, they still choose to use A95.

Therefore, according to Mr. Do, E5 gasoline needs to prove to consumers its effectiveness and ensure quality when used...

Pressure to increase E5 gasoline price

One of the important factors that make up the price of E5 gasoline is ethanol raw material, which is currently in short supply.tend to increase the impact on the price of E5 gasoline.

In fact, if in the first half of 2017 ethanol prices fluctuated from 13,700-13,800 VND/liter, since October 2017 they have continuously increased, surpassing the 14,200 VND/liter mark.

Since the beginning of 2018, ethanol prices have continued to increase to VND 14,315/liter.

Even though it has decreased to over 13,820 VND/liter, many key businesses are still worried that ethanol prices will be difficult to decrease further.