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Vietnam Gas Stations Start To Close Due To Widespread Shortages

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In Vietnam, the government sets the retail price of gasoline, which is adjusted every 10 days to reflect changes in the price of the commodity on the world market. Now, gas stations in Vietnam are starting to close due to widespread shortages.

Vietnam Gas Stations Start To Close Due To Widespread Shortages

Other nations are already seeing gas stations run out of fuel, while the US waits anxiously to see if there will be any diesel stockpiles after the midterm elections. Consider Ho Chi Minh City, the city regarded as Vietnam’s economic powerhouse, where gas stations are being compelled to halt operations as a result of gasoline shortages.

Vietnam, which has a tangled web of responses to a constricted petroleum market, including government price controls and distributors’ declining profits, has a worsened gasoline shortage, adding to the pressure on domestic refineries. Believe it or not, it is plausible to have an even worse government response to an energy crisis than that of the US Democrats, and Vietnam is it.

The core issues behind Vietnam’s petroleum crisis would take some time to fully resolve, according to Nikkei Asia, despite the refineries’ efforts to raise gasoline production.

In mid-October, the government directed two refineries to increase output to the greatest extent possible in order to meet domestic demand. The government also requested that distributors expedite supply to gas outlets. The country’s main state-run oil corporation, PetroVietnam, reacted by raising the operation rate of its Dung Quat refinery in the central province of Quang Ngai to 109% from 107%. Should the government make additional requests, a refinery official stated that the rate may be increased to 110% or even higher.

Even when they claim to be functioning at full capacity, oil refineries typically save some production capacity. When they ramp up output during an emergency, their operational rate can exceed 100%. The Nghi Son refinery in Thanh Hoa’s northern province of Thanh Hoa, in which Japan’s Idemitsu Kosan has a significant stake, had to reduce output significantly at the start of the year due to a lack of finances to import crude oil. However, the refinery has been running at nearly full capacity since April. According to a refinery source, the plant can afford to ramp up its output.

Unfortunately, these steps are too late to reverse a severe crisis: since early October, several hundred gas stations in Ho Chi Minh City, the country’s largest metropolis, and adjacent cities in southern Vietnam have had to temporarily cease operations, citing a lack of inventory.

According to business sources, an explanation for this is that distributors haven’t been able to pass on growing expenses due to what is essentially a government restriction on gasoline pricing. Smaller distributors have been particularly hard hit, preventing them from supplying stations since their profits have become inadequate.

The absence of refineries in the southern region of Vietnam, where Ho Chi Minh City is situated and where around 45% of the nation’s demand for oil and petrochemical products is met, is another factor contributing to the temporary closure of gas stations.

Even in Hanoi, the capital, some residents have raced to gas stations, fearful that the fuel crisis may move north. “Another gas station was closed,” Nam, a tired-looking traveler fuelling his motorcycle, explained. “Here I at least got gas after waiting for 20 minutes.”

Given that several Vietnamese go to work and school on motorcycles, the lack of gasoline is interfering with their everyday lives.

Two refineries satisfy marginally upwards of 70% of domestic demand for oil products, but they have been put at a handicap since the outbreak of the Ukraine crisis, triggering a domino effect in international energy markets. A high-ranking government official stated that since “European countries are buying large amounts of petroleum products,” “a small country [like Vietnam] finds it hard to augment its purchases.”

Here’s another example of why central planning never works: in Vietnam, the government sets the retail price of gasoline, which is adjusted every 10 days to reflect changes in the price of the commodity on the world market. Government mandate acceptance by the nation’s refineries will require them to put up with the particularly unpredictable global pricing of the day.

However, internal issues are also contributing to Vietnam’s supply difficulties. The Nghi Son refinery’s operational rate decreased early this year, causing a nationwide gasoline shortage. Despite the fact that it is currently exploring more frequent price updates and changing the methodology it uses to change prices, the government is adding to the sense of panic.

More prompt price adjustments, according to Prime Minister Pham Minh Chinh, could assist. As matters now are, the price control system causes oil-related enterprises to hold off on selling their products in order to wait for international prices to rise again, allowing them to increase their profits.

Distributors, on the other hand, gripe that recent increases in transportation costs are not represented in the prices set by the government and that their problems worsened early this year when the government decreased the mandatory prices for oil goods. The distributors nevertheless had to pay exorbitant rates on the global market, which led to losses. The companies can no longer keep enough stocks on hand.

While the government looks for alternatives, refineries are discussing capacity expansion. The Dung Quat refinery of the PetroVietnam company intends to increase its refining capacity by roughly 20%. This would let it to produce around 170,000 barrels per day by 2026. The plan’s implementation is projected to cost more than $1.2 billion. The government owns 100% of PetroVietnam. Management and government authorities are in the final stages of finalizing the plan, but finance concerns must be addressed before work on the expansion can commence.

The company also has ambitions to construct a complex with a refinery and a petrochemical facility in the southern region of Ba Ria-Vung Tau. It is anticipated that a refinery close to Ho Chi Minh City will assist lower the cost of delivering petroleum products to the significant economic hub and the area.

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