Vietnam to Restructure Fuel Distribution System, Cut Intermediaries

Prime Minister Le Minh Hung has ordered a restructuring of the petroleum distribution system, aiming to cut intermediaries and associated businesses. This move is intended to reduce distribution costs and ensure a stable supply. At a meeting on September 11, Prime Minister Le Minh Hung assigned the Ministry of Industry and Trade to review and redesign the distribution system. This process must focus on substantially cutting intermediary layers and clearly delineating functions between supply sourcing and distribution/retail. "The new system needs to address the issue of circular trading among traders, which increases costs and makes it difficult to determine responsibility when supply shortages occur," he stated. The Prime Minister also emphasized clarifying the responsibilities of each entity in delivering petroleum products to the retail system, especially during market volatility, to avoid disruptions or localized shortages. For key petroleum suppliers (thương nhân đầu mối), the Prime Minister urged evaluations based on actual supply capacity, financial standing, infrastructure, reserves, and the ability to ensure supply. Business conditions should be more flexible, not solely reliant on input criteria such as warehouses, ports, transportation, or the number of retail outlets. Accordingly, the Ministry of Industry and Trade will develop appropriate criteria to restructure the number of key petroleum suppliers and reorganize the distribution and retail forces. The goal is to ensure that key suppliers are genuinely capable and fully fulfill their supply obligations. The Prime Minister also requested a review of the scope of regulation, applicable subjects, and conditions for each type of trader to avoid overlap, omissions, or the creation of unnecessary procedures. The application of technology was also encouraged to monitor trading activities, verify supply sources, and enhance market transparency. By early 2026, Vietnam is expected to have 33 key petroleum suppliers nationwide. Of these, five will exclusively handle aviation fuel, and two are manufacturers: Nghi Son Refinery and Petrochemical Company and Binh Son Refining and Petrochemical Company. The number of distributors has significantly decreased to 250, down from approximately 330 in 2023, as many businesses voluntarily surrendered their licenses or had them revoked after inspections. Prime Minister Hung highlighted that petroleum is a strategic and essential commodity directly impacting production, business, public life, inflation, and macroeconomic stability. Therefore, restructuring the distribution system is a priority task to ensure energy security and reduce input costs for the economy. However, government leaders acknowledge that the current petroleum distribution system has numerous shortcomings. Vietnam is heavily reliant on the international market, and the price management mechanism has lagged behind market fluctuations, leading to past supply disruptions and localized shortages. The organization of the distribution system is also deemed irrational, with a large number of key suppliers lacking sufficient capacity and limited supply sourcing capabilities. "There are still instances of hoarding, speculation, circular trading, and smuggling. Numerous violations have been detected across various stages recently," he noted. In addition to the distribution system, the head of the government agreed to continue managing petroleum prices based on market principles with state oversight. The Ministries of Industry and Trade and Finance have been tasked with coordinating the review of pricing formulas, business costs, profits, declarations, and price announcements. The Prime Minister stressed that the new mechanism must facilitate cost reductions and competitive price decreases for businesses, while simultaneously preventing the abuse of market positions to establish unreasonable prices. Regarding supply, the Prime Minister called for the completion of the circulating reserve mechanism and stabilization tools to ensure the state has sufficient capacity to intervene during abnormal market fluctuations. Transition provisions, particularly concerning the Petroleum Price Stabilization Fund, must be fully developed to avoid legal gaps. Recently, the Ministry of Industry and Trade has consulted multiple times on a draft decree for petroleum business. The ministry has proposed reorganizing trader types, reducing procedures, shifting from pre-audits to post-audits, and altering the price management mechanism. Prime Minister Hung instructed the Ministry of Industry and Trade to continue working with businesses, industry associations, experts, and to solicit broad public input to finalize the draft decree, submitting it for promulgation no later than early October.