SINGAPORE: There is no evidence to suggest collusion in petrol pricing, the Competition Commission of Singapore (CCS) announced at a media briefing on Tuesday (Feb 23).
This is despite the fact that the four petrol companies - Caltex, Esso, Shell and Singapore Petroleum Company (SPC) - monitor and react to each other's published prices, CCS concluded from its interim findings from a study initiated in 2015.
CCS first asked the four major petrol players in February last year to justify why their pump price hikes were more than the increase in government duty. This was also after the Consumers Association of Singapore (CASE) accused the companies of profiteering.
Since then, pump petrol prices have dipped, but not as much as crude oil, which reached their lowest in a decade - decreasing by more than 70 per cent from over S$160 a barrel in 2014 to around S$40 last month.
CCS - a statutory board under the Ministry of Trade and Industry which investigates alleged anti-competitive activities - said it studied factors affecting the movement of petrol prices in Singapore since 2010, and also obtained information from companies on their pricing practices.
The commission said that petrol companies do not use crude oil prices when making cost accounting and pricing decisions for retail petrol. Instead, they use the Mean of Platts Singapore (MOPS) prices - the price at which petrol companies purchase refined wholesale petrol from refineries, and which tends to be pricier than crude oil as it includes the cost of refining crude oil into wholesale petrol.
The MOPS price is determined by markets research firm Platts via market forces.
Last year, this MOPS price constituted less than a third of listed retail price, said CCS. The other components include operating costs, taxes, duties, discounts and rebates - all of which have "generally" gone up in price in recent years, according to CCS. While the operating income margin of petrol companies has increased, this is still smaller relative to the increase in the non-fuel components, it added.
CCS then found out that between Jan 1, 2010, and Jan 31, 2016, the listed retail petrol price moved in tandem with MOPS price. Over an average 10-day period, CCS observed that for every 10-cent change in MOPS price, the petrol price changed by 7 cents in the same direction.
The gap could be due to price changes in the non-fuel components, said CCS, adding that there was no significant difference between the time taken to raise or lower listed prices.
For the period of June 2014 to Jan 2016, MOPS price fell by 52 cents and the price of Octane 95 fell by 35 cents. Taking into account discounts, rebates and the levy increase of February 2015, consumers effectively paid 45 cents - or 24 per cent - less for Octane 95, the commission said.
"The retail petrol market is a dynamic and competitive one," said Ms Chung Xin Lei, a retail sales manager at ExxonMobil. "For the period of the study, you can see there's a relatively high pass-through of the fall in wholesale petrol prices, and we also note that there's no significant difference in the rate at which the pump prices go up or down. In fact, our pump prices have made several downward adjustments in recent months."
Though no evidence of price collusion was found, the Consumer's Association of Singapore (CASE) said that brings little consolation for consumers.
"There are only four companies in the market and there is no so-called competition to enable any of the companies to vary the prices substantially," said Mr Seah Seng Choon, executive director of CASE. "And consumers are not left with much choice. They have to patronise one of the four companies. The fact that there is no collusion doesn't mean the consumer will benefit out of it."
Mr Seah said the association received six complaints in the first two months of this year about pump prices, compared to just two a year previously.
CCS said it will be further conducting a consumer survey on petrol demand to better understand choices and switching behaviour, and a report will be released upon completion.
COMMISSION'S FINDINGS WELCOMED: SHELL
In response to the findings, petroleum company Shell said it welcomes the findings. "We have cooperated fully with them throughout their study and are committed to conducting our business in a manner that is both fair and ethical," a spokesman said. "As a matter of policy, Shell prohibits anti-competitive conduct."
Elaborating on how fuel prices are determined, he said various factors play a part, including prices of refined oil products, foreign exchange, government taxes and excise duties, distribution costs and other operating expenses.
With regards to MOPS pricing, he said that with the price in US dollars, prices of refined oil products are impacted by foreign exchange movements between Singapore and US dollars. "Therefore, comparing pump prices with the crude oil benchmark may not be useful. At the same time, to expect the same percentage rate of change in MOPS as with pump prices does not take into account the other factors mentioned.
The Shell spokesman added that retail prices for regular grades of petrol and diesel have generally seen a "downward trend since May 2015", and the company believes this is a "fair reflection" of the prevailing market realities.