[Vnbiz] Inflation Control

[Tran Dinh Hoanh]

Hi Anh Binh,

When oil price is increased, generally anything that has anything to
do with oil will increase in price too.  Say, rice, rice processing
machines use oil and rice transport uses oil, so even rice price may
be affected, not mentioning your motorcycle everyday.  So oil price
increase has a tendency to push the inflation upward.

However, at the same times, there are things in the economy that may
help reduce the inflation pressure.  Say, if housing price for some
reason is reduced a little (probably because the housing fever has
just passed) then such downward movement in housing price may offset
partially or wholly the upward pressure from oil price.

Or, say, if we have strong foreign investments, such investments may
generate lots of jobs in the economy, that may help many people gain
money and enjoy an increase in wages, so that generally the population
don't even feel the pain of oil price increase.

So the final inflationary effect of an oil price increase on the
national economy is known when we look at CPI (consumer price index).

But here is another serious issue concerning oil price increase, anh
Binh & CACC.  I know that recently Vietnam has decided to let the gas
price (price of refined gasoline that you use for your motorcycle) go
with the market. Meaning, if the international oil price increases you
will have to pay for the full increase.  That sounds like good logics.

But every time the international price increases, it means Vietnam
Petroleum is earning a windfall profit from that increase (from
selling crude oil at a higher price).  And this windfall profit is not
small, because the price of crude oil is the MONOPOLY price set by
OPEC (Organization of Petroleum Exporting Countries).

So on the one hand Vietnam Petroleum (which is a state monopoly, with
a bunch of foreign investors) enjoys monopoly windfall profits from
crude oil price increases, on the other hand the Vietnamese consumers
have to carry ALL the burden of the refined oil price increases.
Isn't that crazy?

Shouldn't the state monopoly (Vietnam Petroleum) channel some of its
profits to "offset" the consumers' price increase.  This "offset" is
characterized by Vietnam Petroleum as "subsidy" so now the government
stops subsidy.  But it is not subsidy.  IT is profit from the right
hand that should be given to the left hand.  Say, if Vietnam doesn't
export its crude oil and refine all its oil, such profit would not
exist and the consumers wouldn't have to pay such a high price either.
 So who is paying and who is keeping all the money?

Have a great day!

Hoanh


On Mon, Feb 25, 2008 at 12:17 AM, Vu The Binh <binh at netnam.vn> wrote:
> [ Vietnam Business Forum ]
>
> FYI. From today the petrol price increased.
>
> http://vnexpress.net/Vietnam/Kinh-doanh/2008/02/3B9FF970/
>
> The increase is around 11.5%. Can any one can estimate how it affect to
> the inflation?
>
> Nice day,
>
> Binh.
>

-- 
Tran Dinh Hoanh, Esq., LLB, JD
Washington DC