Scrapping import duties because of a tanker bottleneck in the Middle East isn't a masterstroke of economic agility. It’s a white flag.
The mainstream narrative suggests that if the Strait of Hormuz stays choked, Vietnam must slash taxes to keep the lights on and the motorbikes running. This logic assumes that the state's job is to shield the consumer from the reality of global physics. It’s a hollow premise. When the cost of moving a barrel of Brent crude spikes because of geopolitical friction, the price at the pump should reflect that friction.
By considering the removal of fuel import duties, Hanoi isn't "supporting the economy." It is subsidizing inefficiency and delaying an inevitable reckoning with energy security.
The Myth of the Protective Tariff
For years, policymakers have treated import duties like a thermostat. They turn them down when the room gets too hot and crank them up when they need to pad the national budget. This ignores a fundamental law of market dynamics: artificial price suppression kills the incentive to adapt.
If you remove the duty, you effectively tell every factory in Binh Duong and every logistics firm in Hai Phong that they don't need to worry about the Strait of Hormuz. You tell them that the government will eat the risk of a regional war so they can keep using outdated, fuel-hungry equipment.
I’ve watched emerging markets fall into this trap before. They burn through fiscal reserves to keep petrol cheap, only to find that when the reserves run dry, the shock to the system is ten times more violent because no one spent the last six months pivoting to alternative energy or more efficient supply chains.
Why the Strait of Hormuz is a Red Herring
The "blockade" narrative is the perfect cover for bad domestic policy. Yes, roughly 20% of the world's liquid petroleum passes through that narrow stretch of water. Yes, a sustained closure would send shocks through the global Brent benchmark. But Vietnam’s problem isn't just the price of the oil; it’s the fragility of the domestic refining infrastructure.
Vietnam has two major refineries: Nghi Son and Dung Quat. Together, they are supposed to meet the lion's share of domestic demand. Yet, they are frequently plagued by technical shutdowns, debt restructuring issues, and maintenance delays.
When the competitor press screams about the Middle East, they ignore the fact that Vietnam’s energy crisis is homegrown. Scrapping import duties is a band-aid on a gunshot wound. It addresses the 20% of the problem caused by global shipping while ignoring the 80% caused by a stagnant domestic energy sector that can’t keep its own wheels turning.
The Arithmetic of Failure
Let’s look at the numbers. Import duties on gasoline in Vietnam have historically fluctuated, but the push to drop them to 0% creates a massive hole in the state budget. In a country where infrastructure projects—bridges, highways, and the actual power grid—are desperate for capital, diverting those funds to lower the cost of a liter of 95-octane fuel is a catastrophic misallocation of resources.
Consider this:
- Revenue Loss: Dropping duties costs trillions of VND in lost tax receipts.
- Consumption Spike: Lower prices encourage higher consumption, which leads to...
- Increased Import Volatility: You end up importing more of the expensive oil you were worried about in the first place.
It is a feedback loop of economic illiteracy.
Stop Asking How to Lower Prices
People often ask, "How can the government protect us from high oil prices?"
That is the wrong question. The right question is: "Why are we still so dependent on a single, volatile commodity that we have to bankrupt the national treasury every time a drone flies over the Persian Gulf?"
The "lazy consensus" is that cheap fuel equals a healthy economy. In reality, cheap fuel is an addiction. High prices are the only signal strong enough to force a shift toward the electrification of transport and the diversification of power generation. By scrapping duties, Vietnam is essentially paying its citizens to remain vulnerable.
The Uncomfortable Truth About Energy Independence
True energy independence isn't about finding the cheapest way to buy someone else's oil. It’s about building a system that doesn't care what the price of oil is.
If Vietnam wants to survive a blockade in the Middle East, it shouldn't be looking at tax exemptions. It should be looking at:
- Grid Modernization: Moving away from the centralized, coal-and-oil-heavy model that fails during peak heatwaves.
- Deregulating the Retail Sector: Let the market set the price. If petrol hits 40,000 VND, people will stop idling their engines and start demanding better public transit and electric alternatives.
- Strategic Reserves: Actually building the physical storage capacity to weather a 90-day disruption, rather than relying on fiscal gymnastics.
The Cost of the "Quick Fix"
The downside to my approach is obvious: it hurts. It hurts the delivery driver, the small business owner, and the commuter. It causes short-term inflation. It makes the government unpopular.
But the alternative—the path Vietnam is currently considering—is a slow-motion car crash. You can't tax-exempt your way out of a global supply shortage. You can only delay the pain, and in the world of macroeconomics, delayed pain always returns with interest.
I’ve seen this play out in Jakarta and Lagos. Governments try to be the "good guy" by subsidizing fuel. They end up with massive debt, crippled refineries, and a population that rioted the moment the subsidies finally, inevitably, had to be cut.
Vietnam has the chance to be smarter. It has a growing tech sector and a massive potential for renewable integration. Using the Strait of Hormuz as an excuse to gut the tax base is a regression.
The Mirage of Global Solidarity
The competitor article treats the global oil market like a community board where Vietnam can just adjust its settings to get a better deal. It isn't. The oil market is a shark tank. When you cut duties, you aren't just helping your citizens; you are effectively handing that margin over to the international traders and producers who will simply raise their premiums to capture the "savings" you just created for the buyer.
In a high-demand, low-supply environment, the seller always wins. If Vietnam cuts its 10% duty, the global spot price doesn't care. The trader in Singapore just sees a buyer with more "room" in their budget and adjusts the premium accordingly. The state loses revenue, the consumer sees a negligible drop in price, and the middleman buys a bigger yacht.
Stop trying to fix the price of oil. Fix the fact that you need it so much.
Hanoi needs to stop looking for a way to make the blockade disappear and start looking for a way to make the blockade irrelevant. Anything else is just political theater performed for an audience that is about to run out of gas.
Put the tax money into the grid. Let the price of petrol scream. Only then will the market actually wake up.
Stop protecting the past and start funding the exit strategy.
