THE IMPACTS OF FALLING OIL PRICES ON VIETNAMESE HOUSEHOLD WELFARE

Abstract

The volatility of oil prices caused by supply-demand disparities as well as economic and political conditions has always triggered economic instability on a global scale. After reaching a record high of 109.45 USD a barrel by 2012, world crude oil prices have been falling steadily until 2016 at 40.68 USD per barrel. The paper uses the static CGE model based on accounting matrix Viet Nam 2012 (VNSAM 2012) to assess the welfare of the household groups under the impact of international crude oil price declines during the period from 2012 to 2016. The results show that the living standards of households have improved significantly in falling oil prices but the increased welfare is unequal among household groups. In which, the rural farm household groups and the highest-income non-farm household in urban are benefited most by the impact of oil price fluctuations. The findings of the analysis highlight the major impact on social welfare through the fuel consumption channel, that is the basis for the Government to develop policies regulating or supporting household groups affected by these fluctuations in a timely manner.

Keywords: Oil price, static CGE, VNSAM 2012, welfare.