Monday's record drop in the retail price of gasoline will cut the cost of doing business and give consumers extra spending cash, experts said.
International crude prices have fallen to a four-year low, prompting economists to urge the government of Vietnam to make sure taxi, bus and shipping fares fall in kind.
The pump price of 92-RON gasoline, the most common fuel in Vietnam, fell by ten percent--leading to the lowest price in four years.
The drop represented the 12th consecutive fuel cut price since July.
Diesel prices dropped by eight percent to VND16,990 per liter. Kerosene now sells for VND17,400 per liter, down eight percent from earlier.
Economist Nguyen Tri Hieu said the falling prices are “a good sign for the economy” for both material and psychological reasons.
“People will spend that money on other things now that they're saving on fuel. And more than that, the drop has relieved people from the pressure of paying too much at the pump.”
Hieu said global crude prices are expected to drop from the current US$60 per barrel to $40 next year.
He said the changes will hurt big producers like Russia and Saudi Arabia, but come as good news for importers like the US, Japan, China and Vietnam.
“Vietnam’s economy will continue to change for the better next year. The country's inflation and CPI picture will brighten starting in the first quarter,” he said.
Economist Ngo Tri Long said the gas price cuts will have major impacts on prices in general, starting in January.
“There will be big, positive changes in consumer prices by Tet (Lunar New Year),” Long said.
He qualified these predictions with a big “if.”
“The government has to supervise price reductions at businesses which operate largely on fuel, such as transportation, manufacturing and offshore fishing.”
Many transportation operators told Thanh Nien that they have no plans to reduce their prices anytime soon.
A representative from a bus company that operates between Ho Chi Minh City and Vung Tau said they will have to consider their personnel and maintenance costs.
Tuong Thanh Hai, deputy director of the Mien Dong Bus Terminal said only around 80 of the nearly 220 companies operating at the terminal have cut prices since fuel began getting cheaper in July.
Most of the cuts were only five to ten percent, Hai said.
The prices on a couple of routes were cut by over 20 percent because they had fewer customers.
“Some businesses have kept their fares unchanged for years whether fuel prices went up or down,” Hai said.
Ta Long Hy, chairman of the HCMC Taxi Association, also said he hadn't heard any plans about fare reductions.
“The companies are considering and calculating; I cannot say anything yet.”
Hy said most taxi firms in the city cut their fares by VND500 a kilometer in early December; only those who haven't yet done so will cut their fares at this point, he predicted
Economist Nguyen Minh Phong said fuel prices fell by around 30 percent this year, but transit costs haven't followed suit.
“The Transport and the Finance Ministries need to stop this nonsense,” Phong said.
On Tuesday, a day after the new fuel prices went into effect, the Finance Ministry asked the Transport Ministry and city/provincial authorities to make transportation providers bring their prices in line with their falling costs.
Those who have not yet cut their prices will have some time before they face punishments and penalties, the ministry said in a statement.
Deviating from government mandated price caps in Vietnam carries fines that range from VND5 to 30 million ($234-1,403). Violators must submit the money they've earned through their violation to the state budget.
The ministry began issuing pricing directives in November, when it established three inspection teams to keep prices in line in Hanoi, Ho Chi Minh City and Danang, prompting several companies to cut their prices by 2 - 11 percent.