Asian Nations Act to Stabilize Oil Prices, Vietnam Uses Fund to Subsidize Fuel, South Korea Expands Energy Subsidies

TradingKey - Against the backdrop of significant global energy price volatility, several Asian countries have taken measures to intervene in oil prices. On March 11 local time, the Vietnamese government announced the mobilization of its fuel price stabilization fund to buffer domestic consumers from the impact of rising international oil prices through a subsidy mechanism.

According to data released by Vietnam's Ministry of Industry and Trade, after the government mobilized the stabilization fund, the retail price of RON-95 gasoline actually rose by only 7.66%, diesel increased by approximately 1.6%, and kerosene prices saw a decrease of about 7.7%.

To curb oil price hikes, the Vietnamese government implemented direct fuel price subsidies, with the subsidy for RON-95 gasoline reaching a maximum of 5,000 Vietnamese dong per liter. This measure significantly reduced the magnitude of terminal price increases. Official data show that without the fund's intervention, the price of RON-95 gasoline might have risen by more than 22%, and diesel price increases could have exceeded 18%.

The Vietnamese government stated that the mobilization of the stabilization fund is primarily to alleviate the shock to the domestic economy caused by recent international energy market volatility. Influenced by tensions in the Middle East and rising global energy supply uncertainty, international oil prices have continued to climb recently, leading to various degrees of price increases for refined oil products in multiple countries.

It is worth noting that, historically, the fund has been mobilized on a large scale multiple times, such as during the initial stages of the Russia-Ukraine conflict in 2022 and the oil price peak in the summer of 2024, with cumulative expenditures reaching tens of billions of Vietnamese dong.

Market participants pointed out that the fuel price stabilization fund is an important tool for Vietnam to regulate the energy market; by providing subsidies during price hike cycles, it can smooth price volatility and ease cost pressures on residents and businesses to some extent. However, Pham Luu Hong, chief economist at SSI Securities, stated that the fund can be maintained at its current intensity for about three to four weeks. If the conflict persists for several weeks without effectively cooling down, whether the fund can maintain oil price stability remains a concern.

In South Korea, the government has explicitly stated that it will deploy all available policy instruments, including the formulation of a supplementary budget. First, the government decided to temporarily expand the fuel price subsidy linkage mechanism. When prices for diesel and other fuels exceed 1,700 Korean won per liter, the subsidy for the excess portion will be increased from 50% to 70%.

Regarding Japan, the country had previously considered taking independent action to release national oil reserves to address energy security challenges. In past decades, Japan's release of strategic oil reserves has typically been conducted under the framework of coordinated action by the International Energy Agency (IEA). This independent action underscores the severity of the oil price situation.