An increase in world oil prices is helping Vietnam speed economic growth and build new roads and bridges. But it also means higher fuel prices for its own people.
Vietnam is not a major oil-producing nation like some Middle Eastern nations. However, it does sell more than $3 billion worth yearly, making oil exports the fifth highest source of revenue for the country.
Ralf Matthaes is with Infocus Mekong Research in Ho Chi Minh City.
“Vietnam has got a huge level of natural gas reserves and a level of oil, so if the prices go up that would definitely be a boon for Vietnam.”
Crude, or unprocessed, oil prices last year averaged $60 a barrel. If they rise to an average of $65 a barrel this year, Vietnam’s economy will grow above the 6.7 percent target set by its legislature. That information comes from the Communist Party of Vietnam’s website.
Matthaes said it would show that Vietnam’s economic growth is, in his words, “not just about coffee and rice.”
World oil price hikes
The Vietnamese Ministry of Finance says that revenue from crude oil exports will reach $3.13 billion in the first nine months of 2018. That is an increase of 42.5 percent over the same period last year.
Vietnam will export around 11.23 million tons of crude oil this year. Australia, China, Japan, Malaysia, Singapore and Thailand are the main buyers.
The crude oil exports add to an economy that has grown by around 6 percent every year since 2012.
What to do with the money
Matthaes said oil revenue would give the government more funding for infrastructure. New roads and improved transportation systems make it easier for manufacturers to move goods from factories to ports to overseas markets. Ease of shipping products will also help producers in Vietnam compete with China and other Southeast Asian nations.
Although it exports crude oil, Vietnam is an importer of processed, or refined, oil products. The country’s refineries cannot meet the demands of its 95 million citizens. So, Vietnam imports about 70 percent of its fuel. The imports come mostly from China, Malaysia, Singapore, South Korea and Thailand.
Frederick Burke is with the law firm Baker McKenzie in Ho Chi Minh City. He suggests that state-owned enterprises like PetroVietnam might build more oil refineries in the future.
Dependence on imports will raise the price that Vietnamese people pay for fuel, a threat to inflation. Gasoline prices will rise 5 to 15 percent and may increase inflation by up to 0.64 percent over the year, the government says.
The fuel-buying public can "feel the heat,” said Trung Nguyen, director of the Center for International Studies at Ho Chi Minh University of Social Sciences and Humanities.
“They are used to the oil price rise, so I think that they still can withstand it, but I don’t know how far they can.”
I’m Caty Weaver.
VOA reporter Ralph Jennings wrote this story. Hai Do adapted it for Learning English. Caty Weaver was the editor.
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Words in This Story
revenue - n. money that is collected by government or paid to a business
reserve - n. a supply of something
boon - n. a benefit or advantage
infrastructure - n. basic equipment and structures (such as roads and bridges) that are needed for a country or region