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Feb 21, 2022 / 19:52

Local transportation firms face survival dilemmas amid skyrocketing fuel prices

The rising fuel prices are turning to be a barrier for the recovery of the economy in general, and the transportation sector in particular.

Skyrocketing fuel prices in recent days and the low transportation demands put businesses in this field before survival dilemmas.

 Transportation activities almost froze for the past two years. Photo: The Hanoi Times

To cover the high fuel prices, many are considering raising transport fares, but by doing so, they could face the risk of passengers turning away.

Do Van Bang, director of Minh Thanh Phat Company, said rising fuel prices, accounting for 40-50% of the operational expenses, are their major concern for the past few days.

“After Tet, we have been able to operate at 30% of the capacity due to the lack of customers,” Bang told The Hanoi Times, noting they are downscaling the business to minimize the losses.

Bang, just like many others, is worried that in case fuel prices keep going up in the coming days, his company may not sustain for long.

In the pre-pandemic period, transport companies would raise the transport fares to offset the rising fuel prices, but this would cause adverse impacts in the current context.

“Fares rising is quite sensitive during the pandemic-hit period and people see this as a cold-hearted move,” he added.

But even doing so, it could be “suicidal ” as the ridership is already low on fear of Covid-19 infections.

 Bang called for the Government agencies, especially the Ministry of Industry and Trade (MoIT), to soon put in place measures to stabilize the petroleum prices.

“In the long term, the MoIT should consider lowering the tax rates on petroleum products,” he said.

Sharing Bang’s view, the Director of Phiet Hoc Company To Quang Hoc said transport companies are in a dilemma between rising fares and keeping passengers.

“For the past two years, many businesses were struggling with the pandemic. But when we are starting to recover, the petrol prices hitting an eight-year high is a nightmare for the whole transportation sector,” Hoc told The Hanoi Times.

 Few passengers at My Dinh station. 

Hard to cool down petrol prices

Transport expert Bui Danh Lien, the former Chairman of the Hanoi Transportation Association, said rising petrol prices are having negative impacts on every aspect of the economy.

“Sustaining losses for a long period may lead many to bankruptcy,” Lien told The Hanoi Times.

Lien called for the Government to work out financial support for the people and businesses in the short-term, but acknowledged a subsidy scheme is hard to implement during this difficult economic period.

Economist Ngo Tri Long noted petroleum is one of the most important aspects for transport businesses.

“Unlike other economic sectors, passenger transportation activities would need a long time to recover and regain the pre-pandemic level,” Long told The Hanoi Times.

“But when the pandemic is gradually contained, the rising fuel prices are turning to be a barrier for the recovery of the economy in general, and the transportation sector in particular,” he added.

With the domestic fuel prices largely dependent on the prices of the global market, any solution would only be short-term, and waiting for the prices to cool down is the only option for many, he said.

Petrol prices in the world market on February 20 were estimated at US$91.16 per barrel, sharply increasing from the $78.63 in early January due to concern over a possible armed conflict between Russia and Ukraine.

Brent crude futures rose to $94.88 per barrel in the early trading session today, up 1.4% against yesterday, while the crude oil WTI futures also moved up by 1.8% to $92.93.

"If a Russian invasion takes place as the US and UK have warned in recent days, Brent futures could spike above US$100/barrel," Commonwealth Bank analyst Vivek Dhar said in a note as quoted by Reuters.