It was on Saturday last week that for the first time ever, I did not pay attention to the meter of the fuel dispenser at a gas station following the requirement of an employee who asked me to watch his pumping process, as I often did.

Previously, I usually spent VND80,000 for 3.45 liters of A92 gasoline, but I know that as the local gasoline price at the pump had surged to its record high on the previous night, I thought, let the meter run, I would not get the 3.45 liters that could fill up my tank.

Local people in big cities, like Hanoi and Ho Chi Minh City, were pictured rushing to their closest gas stations to fill up their gas tanks, as gasoline prices were poised to reach a height at 8:00 pm on Friday last week.

Some even brought additional types of liquid containers to buy gasoline like there was no tomorrow.

Overall, we did that because many people, like me, know that it is not only the gas price but also the prices of almost all kinds of goods and services that will be on a rising trend, as fossil fuel is the input of all industries.

So, the rush to buy gasoline is just a kind of defense act, like a hedgehog rolling into a tight ball to cause all of the spines to point outwards when danger comes.

The official announcement on the price hike of gasoline came only two hours before that.

The hike came as a great surprise as just a day earlier, news wire Vietnamnet reported that local petroleum wholesalers were enjoying a daily profit amounting to some trillions of Vietnam dong from the money extracted from the national fuel stabilization fund. (VND1 trillion = $47.7 million)

The fund, managed by a joint committee of the Ministries of Finance and Industry-Trade, is fed by the amount of money paid by consumers in advance right at the pump so that those wholesalers would not raise the price so much in case of world price volatility.

They were enjoying a profit of VND1,000 and VND800 per liters of gas and oil products sold, as the world price decreased by 5-7 percent, according to Vietnamnet. The country is estimated to consume around 37 million liters of petrol and oil daily.

The move also came as shocking for local economists, as The Wall Street Journal reported that China decided to reduce the price of petrol just one day before Vietnam took such a contrary move. "The administration is so jerky and contrary to the general market rule of the world," said economist Ngo Tri Long, former deputy director of the Institute for Market and Price Research.

The state-run monopoly power supplier, the Electricity of Vietnam Group (EVN), has recently pledged not to raise the retail price in this month, though stating at the beginning of this year that it had to adjust the price by at least 7.2 percent to VND1.459 per kWh on average in 2013 for covering its past losses.

HCMC’s government in January this year gave the green light for tap water price to increase by VND400-1,700 per liter.

Overhanging threats

Cost-push inflation, caused by the hike of input factors like the prices of utilities, is the first thing to be concerned about.

It is still fresh in Vietnamese people's minds that Vietnam often struggled with double-digit inflation rates over the past year. Only the tightening monetary and fiscal policies, signaled by Resolution 11 of the government dating back to February 24, 2011, can save the day, and brought the rate to single digits by the end of last year.

The consumer price index (CPI) in March edged down 0.19 percent against February after eight months of continuous rise, according to the General Statistics Office of Vietnam (GSO).

So, state agencies may have taken the opportunity of a negative CPI rise to hike gasoline prices, as it will cause little impact on inflation, Long said.

But the potential risk of inflation remains high, as the CPI in March of this year rose by 6.64 percent in comparison with March 2012, and the CPI rate in the first quarter of this year marked a 6.91 percent year-on-year increase, he added.

Another threat is that the rise will hammer the exhausting purchasing power of the local consumers, as people will only focus on essential goods, like food and fast-moving consumer goods, and turn their backs to other goods, including durable goods. 

"The March CPI is low as the purchasing power is under great pressure, so the gasoline price hike is a misleading move," says Long, adding that the sudden rise in such an economic context will have many implications for the unsold inventories.

As of March 1, 2013, the total inventory of processing and manufacturing sectors increased by 16.5 percent compared to the same period last year but lower than the 19.9 percent rate recorded on February 1, 2013.

High inventory indices are recorded in electric wires-cables products (62 percent), structural metal products (35.6 percent), motorized vehicles (37.3 percent), concrete and plaster and cement products ( 28 percent), chemicals and chemical products (27.4 percent).

Rising unsold inventories, plus a double-digit lending rate, are the main causes for the dissolution of tens of thousands of local firms in 2011 and 2012, and for this year.

Some 320,000 out of 650,000 Vietnamese businesses, 97 percent of which are small and medium enterprises, went bankrupt by the end of 2012.

About 15,000 ones declared bankruptcy in the first quarter of this year, banking expert Le Tham Duong, head of Business Administration Department of Ho Chi Minh City University of Banking, told Tuoi Tre in a recent workshop.