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What’s Up with the Petrol Prices?

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Top Image - Petrol pump prices in Singapore are going up

Global oil prices are heading south, but petrol pump metres in Singapore are still reeling upward, much to the consternation and indignation of local motorists. Is there a valid reason for the discrepancy? We find out.

Let’s face it: the price of living in Singapore is definitely going up. So much so that we’ve topped the charts – again! – for the title of “the world’s most expensive city”.

The survey by the Economist Intelligence Unit pointed out that due to our complex Certificate of Entitlement (COE) system, Singaporean transport costs are almost three times higher than in New York.

Add to that the fact that fuel pump prices are reeling upwards, and it’s little wonder why motorists in Singapore are also reeling – in shock, that is.

READ: The Story of Oil and the Public Transport Fare Increase

Last week, just one day after the government announced an increase in petrol tariffs to encourage less car usage and reduce carbon emissions, pump prices went up across the board at all four petrol retailers in Singapore – Esso, Shell, Caltex, and SPC. Prices went up by as much as 25 cents per litre for 98-octane petrol and 18 cents for 95-octane petrol.

Though companies like Shell and Caltex have since tweaked the prices slightly, the fact remains that the price hike in the local petrol market outweighs the government’s increase in petrol duty rates, which was set as 20 cents per litre increase for premium grade petrol and 15 cents per litre increase for intermediate grade petrol.

Local motorists likely did not see this coming, as petrol duty rates have remained unchanged since 2003. To them, it is definitely not a welcome change, as any increase in petrol duty translates to higher retail prices and an even bigger hole in the pockets.

A uniquely Singapore phenomenon?

Since late November last year, the average price of petrol around the world has been hovering at around S$1.46. By comparison, the average price in Singapore is S$1.86.

In the last week alone, the average price sprang up from S$1.86 to S$2.02 as of 2 March 2015.

Article Image - Singapore Petrol Prices, 24 Nov 2014 to 2 Mar 2015
[Source: GlobalPetrolPrices.com]

The truth is, all countries have access to the same petroleum prices of international markets. Retail pump prices are affected by a combination of factors: wholesale fuel prices (which account for about 50% of pump prices in Singapore), excise duties and goods and services tax (which account for about 30% of pump prices), currency exchange rates, operating and capital costs, and market competition.

What makes fuel prices vary drastically from country to country is essentially one word: taxes.

Why the heavy taxation in Singapore, you may ask? Granted, our petrol prices aren’t as exorbitant as in the United Kingdom or Germany, but why not have it like Venezuela, for instance, where the government subsidises petrol such that the people pay close to nothing to drive their cars?

Article Image - Singapore Petrol Prices, compared to other countries
[Source: GlobalPetrolPrices.com]

Unfortunately, this isn’t quite possible in Singapore. The reality is that in a small country like ours, land scarcity has turned private transportation into a luxury. Car ownership is heavily taxed under the COE system precisely to encourage people to turn to the BMW (bus, MRT, and walk) as their main modes of transport. By the same token, petrol has to be taxed as well.

Are Local Players Profiteering?

As mentioned earlier, petrol duty rates imposed by the government were increased by 20 cents per litre for premium grade petrol and 15 cents per lire for intermediate grade petrol.

Let’s take a look at the revised pump prices in Singapore:

  Shell Esso Caltex SPC
V-Power /
Platinum 98 with Techron
Before $2.40 N.A. $2.08 N.A.
After $2.63 $2.25
RON 98 Before $2.03 $2.02 N.A. $1.99
After $2.26 $2.23 $2.20
RON 95 Before $1.86 $2.04 $1.89 $1.85
After $2.02 $2.20 $2.01 $2.01
RON 92 Before N.A. $1.82 $1.85 $1.81
After $1.98 $1.97 $1.97

[Figures as of 4 March 2015]

From the figures, two things are clear:

  • Except for Caltex, the other three petrol companies raised pump prices beyond the 15 to 20 cents recommended by the government.
  • Shell posted the greatest hike in fuel prices – 23 cents for premium grade petrol and 16 cents for intermediate grade petrol (same as Esso and SPC).

Are the companies deliberately jacking up prices for their own gains? Not all, according to Mr Seah Seng Choon, Executive Director of the Consumers Association of Singapore (CASE).

Caltex’s, Esso’s and SPC’s explanations for the price hike have been deemed “satisfactory”, says Mr Seah. For the latter two companies, the extra one to two cents increase is due to GST charged on the increase in government excise duty.

[Note: Factoring in GST, the actual raise in government excise duty is effectively 21 cents per litre for premium grade petrol and 16 cents per litre for intermediate grade petrol. Think of it as ‘taxing the taxes’ – CASE has verified with the authorities that it is “not wrong” to do so.]

However, the consumer watchdog is calling out Shell for profiteering, as their explanation provided was “rather vague and general”. Shell has cited reasons such as operational, production and distribution costs to account for the increase beyond government tariffs, but frankly, we’re not biting – petrol is largely a homogenous commodity and it is relatively easy for competitors to monitor each other’s prices.

We can’t help but wonder if Shell’s price hike is related to their troubled operations in the United States – the refinery giant is still trying to end a strike involving over 6,550 workers. We’ve already reached out to Shell on this and will update in due course with their comments, if any.

The Ministry of Trade and Industry (MTI) and the Competition Commission of Singapore (CCS) have already stepped in to declare that they “will not hesitate to take firm action against parties who are found to be engaging in anti-competitive behaviours at the expense of consumers”, so hopefully we’ll see a resolution to the petrol price hike before long.

But in the meantime, local motorists will simply have to content themselves with finding the cheapest petrol stations and best credit card rebates and promotions for topping up their fuel tanks. That, or take a hike across the causeway.

READ: Why You Should Worry about the Falling Ringgit

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