Vietnam mulls cutting environmental tax on fuel to 0% to secure supply amid Middle East tensions

Prime Minister Pham Minh Chinh on Tuesday instructed the Ministry of Finance to study and propose a plan to cut the environmental protection tax on petroleum products to zero percent and submit the proposal to the government by Thursday, according to the Vietnam News Agency.

The directive was issued during a meeting chaired by the prime minister with the government’s energy security task force to discuss measures to safeguard Vietnam’s energy supply as the rising conflict in the Middle East involving the U.S., Israel, and Iran continues to disrupt global oil markets and supply chains.

Government officials warned that escalating tensions could affect Vietnam’s macroeconomic management, including economic growth and inflation control, while pushing up transportation and logistics costs and increasing the risk of speculation, hoarding, and cross-border smuggling.

Chinh stressed that Vietnam must ensure energy supply under all circumstances and prevent any shortages that could disrupt production, business activities, and daily consumption.

Lowering the environmental protection tax on fuel is being considered as part of broader measures to stabilize the domestic petroleum market and facilitate imports when necessary.

The Ministry of Industry and Trade was tasked with directing fuel wholesalers to seek additional supply sources and increase imports to meet at least 30 percent of Vietnam's fuel demand while maintaining required reserves and preparing contingency supply scenarios.

The government also approved in principle the use of the petroleum price stabilization fund to help cushion domestic fuel price increases.

In the latest price adjustment on Tuesday, the Ministry of Finance and the Ministry of Industry and Trade used between VND4,000 (US$0.15) and VND5,000 ($0.19) per liter or kilogram from the fund, the highest level ever applied, to curb rising fuel prices, the Vietnam News Agency reported.

At the same time, Vietnam is seeking to diversify its crude oil supply sources.

Recent phone calls between the prime minister and leaders of Gulf countries, including Kuwait, Qatar, and the United Arab Emirates, resulted in commitments to maintain stable energy supplies to Vietnam.

Vietnam currently relies on a combination of domestic refinery output, imports, and reserves to meet fuel demand.

The Dung Quat and Nghi Son refineries in Quang Ngai and Thanh Hoa Provinces, respectively, are operating normally and supplying the domestic market, authorities said.

However, in recent days, long lines have been reported at several gas stations in some areas as people rushed to buy fuel amid concerns over possible shortages and rising prices.

The prime minister called on the public to remain calm and avoid panic buying or hoarding, warning that such behavior could destabilize the market.

Authorities were instructed to strengthen inspections and strictly handle violations such as hoarding, price manipulation, and speculation in the fuel market.

Police were also asked to coordinate with the Ministry of Industry and Trade to monitor the market and ensure smooth fuel transportation into urban areas to prevent localized shortages.

In addition to short-term measures to stabilize fuel supply, the government is promoting longer-term energy transition efforts.

The prime minister called for accelerating the use of E10 biofuel under a government resolution while launching nationwide campaigns to promote energy conservation and green energy to reduce emissions.

Authorities were also instructed to encourage a shift to electric and clean energy vehicles, strengthen fuel-saving practices in transportation and promote greater use of public transport.

Chinh said the current situation also presents an opportunity for Vietnam to accelerate its energy transition while ensuring adequate fuel supplies for key national projects, particularly those serving the APEC 2027 Economic Leaders’ Week in Phu Quoc Special Zone, An Giang Province, southern Vietnam.