Public urged to use fuel economically as price rises

The government has approved a further increase in fuel prices, which poses challenges regarding the management of inflation in Laos .

According to the Ministry of Industry and Commerce, the government has approved fuel price increases per litre of 100 kip for premium petrol, 260 kip for regular petrol, and 150 kip for diesel. This will apply to petrol stations throughout the country.

The price at the pump for one litre of premium petrol is now 12,620 kip, up from 12,520 kip. Regular grade petrol costs 11,880 kip, up from 11,620 kip, and the cost of diesel is now 11,790 kip, up from 11,640 kip, according to the ministry.

Domestic Trade Department Director General Santisouk Vilaychareun said yesterday the government's decision to raise fuel prices was based on rising global fuel prices.
“ Laos is not the only country to raise fuel prices; other countries have made the same decision,” he said.

Mr Santisouk said the government would not cut taxes on fuel to keep prices lower because it would send the wrong signal to consumers about using fuel economically and cutting back on energy use. He said the government wanted to encourage consumers to use fuel as economically as possible.

The government does not see a reduction in taxes as a solution to stabilise fuel prices, Mr Santisouk said, and was already providing fuel subsidies of 300 to 400 kip on every litre.

“You can get a picture of the extent to which the government is subsidising fuel prices; in one day people in Laos consume about 1.2 to 1.3 million litres of fuel.”

The government pays about 520 million kip in fuel subsidies every day, according to trade officials. Mr Santisouk expressed concern over rising fuel prices, saying it would drive inflation even higher.

Inflation reached 10 percent in May, driven by rising oil prices. Inflation stood at 8 percent in April and 6 percent in February, according to the Ministry of Planning and Investment's Statistics Dep artment.

Mr Santisouk said higher fuel prices caused higher transportation costs, which was one of the main factors driving up the price of goods in local markets. He said the increase in the price of consumer items and construction materials would have a negative impact on the growth of the economy.

The best way to lower inflation was to encourage people to consume less fuel by using energy economically and efficiently, he said. He urged government leaders and officials to set an example to the public in this respect.

“From now on, we have to think about what we can do to use less fuel, to look at which cars use less fuel,” he said.

He also advised Lao people to change their buying habits and purchase more items that were locally produced.

Economists say the government's policy to curb lavish spending is good but officials must make it clear in which areas the public should cut their spending. It is undesirable to encourage people to spend less overall, because this would slow economic growth.

Coordinator of the Lao Petroleum and Gas Group under the Lao National Chamber of Commerce and Industry, Mr Phet Chanthamaly, said petroleum importers had recorded an increase in fuel consumption from 462 million litres in 2006 to 627 million litres in 2007.

Laos paid US$243 million for fuel imports in 2006 and US$452 million in 2007, he said.

By Ekaphone Phouthonesy (Latest Update July 3, 2008)