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Drivers unlikely to enjoy much savings at pumps despite lower oil prices: Analysts

TODAY reports: Experts say crude oil prices make up only one component of the price of petrol, and other factors such as petrol duties and various business costs also play a part in determining pump prices. 

SINGAPORE: Crude oil prices have fallen to their lowest in more than a decade, but this does not mean that motorists will see any significant decrease in pump prices — although households could enjoy some relief in their utilities bills in coming months.

This is because other factors such as petrol duties and various business costs also play a part in determining pump prices, analysts told TODAY.

Crude oil prices have fallen by 70 per cent since mid-2014, when it was US$115 (S$165) a barrel. On Monday (Jan 18), the benchmark United States crude fell under US$28 a barrel, the lowest level since 2003.

Among the main petrol companies here, Chevron (Caltex), ExxonMobil (Esso) and Singapore Petroleum Company (SPC) said they have been adjusting prices downwards, some as early as late last year. But they pointed out that currency fluctuations and other costs also affect pump prices.

Responding to queries, Chevron said it made four pump decreases since last month, while ExxonMobil said it made five rounds of downward adjustments “in the last two months” to pump prices of gasoline and diesel. SPC said it has adjusted pump prices downwards twice since the start of the year.

Pump prices at the three petrol companies plus Shell ranged from S$1.87 to S$1.92 per litre for 95-octane grade petrol, the most commonly used type here, as of last week. For 98-octane grade petrol, prices ranged from S$2.17 to S$2.25. The prices were before discounts.


SIM University senior lecturer Walter Theseira noted that oil prices make up only one component of the price of petrol.

“A large part of petrol prices is government taxes, refinery and transport costs, and other costs of doing business such as manpower and rentals. In Singapore, about 25 to 33 per cent of pump prices is the petrol excise tax,” he said.

Mr Song Seng Wun, economist at CIMB Private Banking, said he does not expect petrol prices to decrease as the Government’s position is to encourage Singaporeans to take public transport, and petrol duties were increased last year.

However, he noted that the utilities tariff has been cut by about 4 per cent for this quarter compared with the previous quarter. “If the current trend continues, households can expect another downward cut in utilities bills in the second quarter,” said Mr Song.

Ms Selena Ling, head of treasury research and strategy at OCBC Bank, said pump prices could fall further if crude oil prices continue to slide, although the impact “may not be as significant” as what was seen in end-2014.

“The drop was from US$100 per barrel to less than US$50 (back then), today we went from US$40 to US$30,” she said.

Commenting on the factors petrol companies consider before adjusting their pump prices, a Chevron spokesperson said it “closely monitors the competitive landscape”, and considers factors such as refined product prices as well as supply and demand.

An SPC spokesperson said the company takes into account factors such as investment costs, selling and market costs, and logistics and distribution costs.

Apart from production costs, an ExxonMobil spokesperson noted the US dollar “is the determining currency for product costs”. For instance, between February and December last year, the US dollar went up against the Singapore dollar.

“This too has some influence on the overall pump prices,” the spokesperson said. 

Read the original TODAY report here