Petroleum is a strategic commodity, the world petroleum market is influenced by economic and political factors of countries such as: the US-China trade war, trade tensions between major economies, such as: the US, the EU and Canada; geopolitical tensions in the Middle East… After many years of continuous export, from 2018 to now, Vietnam’s crude oil export volume is on a sharp downward trend while the import volume is increasing many times. The main reason for the sudden increase in crude oil imports is that at the end of 2018, Nghi Son Refinery and Petrochemical Plant – a national key project, was put into operation (crude oil imports in 2018 increased by 337.6% in volume and 475.8% in value).

In the coming time, the demand for imported crude oil of Vietnam will remain high for processing and use for production and consumption. Therefore, the increase or decrease in world oil prices will affect domestic production and consumption. At the same time, the change in the price of this item will lead to certain fluctuations in prices of other items, reflected in the change in CPI.

Growth/decrease of petroleum prices and average consumer price index over the years (%)
2015 2016 2017 2018 2019 2020
Average Brent oil price -45.6 -17.4 20.74 31.3 -10.28 -33.88
Average domestic petroleum price -24.77 -15.95 15.49 15.25 -3.14 -23.03
Contribution of petroleum prices to the overall CPI -0.9 -0.66 0.64 0.63 -0.15 -0.83
Average CPI 0.63 2.66 3.53 3.54 2.79 3.23

In 2020, the crude oil market has encountered an unprecedented crisis in history. World oil prices plummeted in the first quarter of 2020. Specifically, Brent crude oil fell from nearly 70 USD/barrel in early January, 2020 to below 20 USD/barrel in April 2020 due to the double effects of the Covid-19 epidemic and the price war to gain market share between the oil giants Saudi Arabia and Russia. This is the lowest level in more than 18 years, before recovering to about 50 USD/barrel in December 2020. WTI oil even dropped to a negative price for the first time in the session on 20/4/2020. 2020 is also the year that sees a “shock” in the reduction of oil demand. The Organization of Petroleum Exporting Countries and Partners (OPEC+) has to cut production at a record 9.7 million barrels/day, equivalent to nearly 10% of global supply, to balance the market in the medium term, shows that the demand for oil has decreased significantly compared to the previous one. However, in the context of the gradual control of the Covid-19 epidemic as well as the efforts of countries around the world to deploy vaccines to prevent an epidemic, business activities in many economies have shown more positive signs, demand for crude oil gradually recovered and oil prices rose again in the second half of 2020 as the global crude market rationalized supplies. The increase in world crude oil prices affects the domestic CPI. Specifically, the CPI in December 2020 increased by 0.1% compared to the previous month, of which the transport group had the highest increase of 2.45% due to the impact of adjustments of petrol and oil price on November 26th, 2020, on December 11st, 2020 and on December 26th, 2020, the petroleum price index increased by 6.52%, making the overall CPI grew by 0.23 percentage points. In 2020, the average annual CPI increased by 3.23% compared to the average of 2019, reaching the target set by the National Assembly of less than 4%, of which the prices of essential goods such as petrol and oil decreased by 23.03% year-on-year, making the overall CPI decreased by 0.83 percentage points.

Loosening social gap, bringing production and living activities back to normal in many countries helps increase petroleum demand; while the supply cut under the agreement of OPEC+ helped the world petroleum market flourish and Vietnam’s petroleum market also flourished. US oil inventories plummeted, showing a sharp increase in demand for petroleum products, from February 8th, 2021 to February 12nd, 2021, US oil inventories fell by 5.4 million barrels and continued to plummet 5.8 million barrels on February 17th, 2021. At the same time, tensions in the Middle East fueled the rise in oil prices. Even so, global oil inventories are predicted to remain high and excess crude production capacity will limit oil prices from rising in 2021. In addition, the Covid-19 epidemic continues to be complicated, is likely to limit the increase in oil prices and therefore, the world oil price cannot return to the level it was before the Covid-19 epidemic. In the first months of 2021, CPI increased compared to the previous month (January increased by 0.06%; February increased by 1.52% – the highest increase of the price index in February in the last 8 years[1]), partly due to effects of rising petroleum prices. Specifically, petroleum prices in January 2021 increased by 6.07% over the previous month, impacting the overall CPI increase by 0.22 percentage points; petroleum prices in February 2021 increased by 3.28%, the impact on overall CPI increased by 0.12 percentage points.

Although CPI in the first months of the year, especially February increased quite high compared to the previous month, however, compared to the same period last year, CPI still reached the lowest level since 2016 up to now[2]. This is a positive sign that inflation is still under control, with the Government’s drastic direction and experience in price management in recent years, the average CPI target of 2021 increases by about 4% set by the Assembly can be fully achieved./.

[1] The increase/decrease of CPI in February over the previous month of period of 2014-2021: up 0.55%; down 0.05%; up 0.42%; up 0.23%; up 0.73%; up 0.8%; down 0.17%; up 1.52% respectively.

[2] The increase/decrease of CPI in January over the same period last year in period of 2016-2021: up 0.8%; up 5.22%; up 2.65%; up 2.56%; up 6.43%; down 0.97% respectively. CPI growth rate in February over the same period last year in period of 2016-2021: 1.27%; 5.02%; 3.15%; 2.64%; 5.4%; 0.70% respectively.