SINGAPORE: With international oil prices at their highest in more than three years, motorists here could find themselves paying more to fill up their tanks on the next visit to the petrol station.
A check across petrol retailers in Singapore showed prices inching up and experts said costlier crude oil may further fuel the increase.
Advertisement The most popular 95-octane grade petrol, for instance, has risen about 10 cents since January to S$2.31 a litre before discount at Singapore Petroleum Company (SPC), Shell and Caltex, according to prices available on their websites on Monday (May 28).
For the premium 98-octane grade, prices ranged from S$2.61 to S$2.69, up at least 12 cents year to date.
Selling at S$2.27 a litre at SPC and Caltex, the cheapest 92-octane petrol also edged up by 10 cents and seven cents, respectively, since the start of the year.
Diesel prices rose at least 11 cents over the past five months to retail between S$1.74 to S$1.76.
Advertisement Advertisement Over the same period, oil prices rallied as much as 20 per cent when Brent crude futures hit a high of US$80.50 a barrel earlier this month. Amid news that Saudi Arabia and Russia are discussing easing production cuts, the global benchmark for oil pulled back to last trade around US$75 on Monday.
“Pump prices in Singapore have risen given the uptick in oil prices,” said OCBC analyst Barnabas Gan, while adding that the absence of petrol subsidies in Singapore translated into a strong correlation between the two.
“Hence, the uptick in oil prices and its effect on refined oil would likely be translated into the final pump prices.”
Agreeing, OANDA’s head of Asia-Pacific trade Stephen Innes said pump prices here could be in for more increases, with oil possibly reclaiming the US$80-mark within the next three to six months.
“The market right now is trading on a worst case scenario but I don’t see the OPEC (Organization of the Petroleum Exporting Countries) disbanding their deal on supply cuts yet.”
With global oil demand supported by robust economic growth, Mr Innes added: “One more supply disruption is all it takes for oil prices to rebound… And with the primary component of petrol being oil, if the price for that component goes up, petrol prices will naturally go in the same direction.”
To be sure, petrol companies do not use crude oil prices in their cost accounting and pricing decisions for pump petrol. The Mean of Platts Singapore (MOPS) prices, or wholesale prices of refined oil, is used instead.
Determined by markets research firm S&P Global Platts through market forces, the MOPS price has also been mirroring the increase in Brent crude, said its associate editorial director Jonathan Nonis.
However, motorists may be relieved to know that retail petrol is unlikely to see price increases of the same magnitude as global crude oil.
OCBC’s Mr Gan explained: “Petrol prices are less volatile than crude oil, meaning that a US$1 rise in crude oil prices may not necessarily inject an equal percentage rise in pump prices given sticky price assumption, and other factors such as refinery and distribution costs.”
These other factors also include rental and labour costs, duties, as well as currency differences, said UOB economist Francis Tan. As oil is traded in the US dollars, any strengthening in the greenback against the Singapore dollar will mean higher costs and vice versa.
There is also a “lag effect” to take note of, added Mr Tan.
“Even if oil prices go up this month, it will only be one to two months later when consumers feel the pain. This lag effect is due to how prices at the pumps are based on older inventories bought at a lower price.”
He added: “Pump prices is a function of many things, like the wholesale costs, changes in labour and rental costs. That’s why even if petrol prices are headed in the same direction as oil prices, they are less volatile and will not see the same magnitude of movements.”
PUMP PRICES IN LINE WITH MARKET CONDITIONS: RETAILERS
When contacted by Channel NewsAsia, petrol companies that responded said their pricing strategies are driven by a myriad of factors, including competition dynamics, and are in line with market conditions.
SPC said it monitors the market regularly and does periodic adjustments to its pump prices and promotions “to reflect prevailing market conditions”. “SPC has always offered competitive pricing for our petrol and diesel products and will continue to do so,” the spokesperson said.
A spokesman from ExxonMobil said the company offers various discounts and offers, and distinguishes itself through its rewards programme and other promotional activities. “Pump prices at our service station network are in line with prevailing market conditions.”
Over at Chevron, which operates the Caltex brand here, the company said it believes in offering products at “fair, reasonable and competitive prices”. It added that adjustments to pump prices are based on “independent assessment and consideration” of factors, such as government taxes and duties.
Still, some motorists said they can’t help but worry about the increase in petrol prices.
In particular, taxi drivers and private-hire car drivers who clock long hours on the road. The latter may be among those that will feel the biggest pinch as petrol costs make up a significant portion of their expenses and are non-tax-deductible, unlike for cabbies.
With spending on petrol coming up to S$800 a month and accounting for nearly 25 per cent of his monthly income, Mr Chan Choon Hock, 52, said he changed to a Toyota Prius last month, partly due to the hybrid car’s low fuel consumption.
“So far from what I observe, this car can save me about half of what I usually spend and that is important because every cent adds up,” said the Grab driver.
While Mr Ramesh Arumugam said he has not felt the pinch so far, the 50-year-old cabby-turned-private-hire-driver will be keeping a close eye on petrol prices and discounts made available.
“We are on the road most of the time so if prices continue to increase, we will be the ones who will feel the biggest impact,” he said.
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