Conduct a thorough feasibility study for establishing a petroleum exchange.

On July 18, Deputy Prime Minister Le Minh Khai requested the Ministry of Industry and Trade to review and study the establishment of a petroleum trading exchange. Accordingly, the Ministry needs to coordinate with relevant parties to study the establishment of this exchange, and if it exceeds its authority, report to the Prime Minister in July 2024 .

The pilot trading process in this phase proceeded safely and stably, without incidents, initially attracting the attention of many investors and serving as an important channel for providing information to regulatory agencies and news organizations.

However, in reality, it has not yet attracted many businesses to participate in transactions due to unstable policies.

The decision allowed for pilot trading on an annual basis, with renewal required upon expiration. The pilot program for trading petroleum products via MXV ceased on May 27, 2024.

Furthermore, the Ministry of Finance has not yet established policies regarding accounting and bookkeeping procedures for businesses participating in transactions at the Commodity Exchange in general, and for petroleum businesses in particular.

In this context, Mr. Nguyen Ngoc Quynh argued that establishing a petroleum exchange needs careful and comprehensive consideration. Currently, the world price accounts for the largest share of petroleum prices, up to 65%, with the remainder being taxes and fees. Meanwhile, the entire country only has two petroleum production companies, with the rest being imported.

"The necessity of a petroleum exchange needs to be carefully studied and evaluated," was also the opinion expressed by economic experts and the Vietnam Petroleum Association (Vinpa) at the seminar: "For the petroleum market to develop stably, transparently and efficiently," organized by the Government's electronic information portal on the same day.

Economist Ngo Tri Long stated: "In 2020, the Ministry of Finance allowed the Vietnam Commodity Exchange to conduct a pilot program listing crude oil and energy commodities for price hedging and investment. This pilot program demonstrates the government's cautious approach; lessons learned from the pilot will be applied before widespread implementation."

Recently, the Ministry of Industry and Trade halted this pilot program, citing the need to revise Decree 83 on petroleum business and amend Decrees 158 and 151 on commodity exchanges.

"Regarding the question of whether Vietnam needs to establish a petroleum exchange, my personal opinion is that if we can establish a petroleum exchange, it would be very good and necessary because a petroleum exchange has many benefits," Mr. Long said.

This involves enhancing transparency and openness regarding prices and transactions, minimizing risks; creating investment opportunities for all domestic and foreign investors to participate; and promoting competition among exchanges.

For Vietnam, trading petroleum products on an exchange would create a petroleum market that operates openly and transparently. This would also reduce monopolies.

However, this also comes with many challenges, the first being the very high initial cost. Mr. Long cited: "Establishing a stock exchange requires a large investment in infrastructure, technology, and human resources. This is a huge challenge for the economy if we don't have an effective management plan."

The second challenge is management and supervision; the ability of stakeholders to participate; and market risks, as petroleum products are highly sensitive to price fluctuations. Finally, the establishment of a petroleum exchange must be compatible with international regulations.

Therefore, Mr. Long said, it is necessary to thoroughly study the business model, operating methods, and operational procedures of this Exchange. At the same time, this expert suggested: " Initially, it is advisable to allow the trading of energy commodities at the Vietnam Commodity Exchange as before to meet the insurance and investment needs of businesses."

Meanwhile, businesses are also concerned about the effectiveness of a petroleum exchange if it is established.

According to Mr. Nguyen Xuan Hung, Deputy General Director of Vietnam National Petroleum Group (Petrolimex): "Currently, the world only has two exemplary and successful oil and gas exchanges: the Chicago Exchange (USA) for WTI crude oil and the London Exchange for Brent crude oil. These two exchanges are successful because they have created a sufficiently large 'playing field' with a large enough volume of oil and gas, and buyers and sellers..."

But even China, formerly the world's second-largest oil market, had wanted to establish such an exchange, but without success.

"So, if Vietnam establishes a petroleum exchange, will it be able to operate independently from global exchanges? I think not, because even though Vietnam is a crude oil exporter and has refineries, it still has to import a large amount of crude oil for refining and to meet domestic demand. That means domestic prices cannot be independent and cannot be unaffected by world prices," Mr. Hung said.

Further sharing, a representative from Petrolimex stated: "Currently, the biggest influencing factor is that the state is still regulating gasoline and diesel prices. As long as the state regulates gasoline and diesel prices, trading on the exchange will be difficult. For example, if crude oil prices fall sharply today, if trading on the exchange, the price on the exchange will be higher than the market price, and businesses will have to wait until the next price adjustment period to adjust prices. Therefore, trading will be difficult.”

Vinpa Chairman, Mr. Bui Ngoc Bao, stated: "If we build exchanges like those in Singapore, New York, the US, or the EU, these exchanges clearly require a very high degree of interoperability, no different from gold and silver exchanges. All products there must be interconnected; we cannot build an exchange and have a separate price index for gasoline and oil."

"In the past, the Vietnam Commodity Exchange (VCOM) has made certain progress through iron, steel, and other commodities. In the US, there are regulated commodity exchanges in Chicago, oil exchanges in New York… But we can certainly continue to experiment with adding more commodities like gasoline and possibly linking up with other products like 92 and 95 octane gasoline to see how it implements over time," Mr. Bao suggested.

The Ministry of Industry and Trade continues to listen to the opinions of associations, businesses, and experts on the establishment of a petroleum exchange in Vietnam, in order to both seriously implement the Government's directives and consider and research the establishment of a model suitable for Vietnam.
Mr. Phan Van Chinh, Director of the Domestic Market Department, Ministry of Industry and Trade .