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Falling oil prices and impact on the economy

by VTV16 December 2015 Last updated at 09:32 AM

VTV.vn - That situation raises a question among economic experts whether Vietnam should continue oil exploration and what impact falling oil prices will have on the country’s economy.

Global oil prices have continuously fallen from the beginning of December and recently reached 35 US dollar per barrel, some 33% lower compared with earlier this year. According to PetroVietnam or PVN, it costs from 30 to 37 US dollars per barrel of oil in terms of exploration costs. That situation raises a question among economic experts whether Vietnam should continue oil exploration and what impact falling oil prices will have on the country’s economy.

According to the International Energy Agency (IEA), oil prices are forecasted to continue to decrease in 2016 as ample oil stockpiles will likely last through until next year. Organisation of the Petroleum Exporting Countries OPEC decided not to reduce output last Friday.  Consumers are also likely to pay less to heat their homes due to the so-far mild winter.  With the price of only 35 US dollars per barrel, while manufacturing cost fluctuate from 30 to 37 US dollars per barrel, this posts a huge challenge for Vietnam’s petroleum industry.

Mr VU DINH ANH, an Economic Expert, said that: "The average cost is relatively higher compared with Middle Eastern countries. More importantly, crude oil is a limited resource, we can’t forever explore or exploit. So we should consider if we should maintain output as currently or not"

Sharing the commentation with Mr Anh, Mr NGUYEN DUC DO, Deputy Head of Financial Economic Institute, Finance Academy, added: "This is a hard question. If we stop exploring, we’ll lose certain customers as well as economic partners. Secondly, investment in equipment would be wasted".

In term of the macro economy, the drastic fall in oil prices should have a positive impact consumer spending. In terms of the state budget, revenue from crude oil only contributes 6%, therefore falling prices will be motivation for Vietnam to find other alternatives.

"This is a good chance for our country to find an alternative to focus on instead of exploring crude oil. Although the portion of revenue from crude oil is decreasing but it’s relatively high", said Mr Vu Dinh Anh.

In addition to adjusting master plans to lessen the emphasis on crude oil, many experts have also recommended enhancing economic reform and taking advantage of cheaper oil to create prerequisites for the steady economic development in the coming time. /.

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