SINGAPORE: For the first time in the recent series of pump price cuts, local stations lowered prices twice in a day, sparking off what could be a price war and countering talk of collusion among oil companies.

Falling wholesale pump prices — and not crude oil futures, as is often thought — are behind the general reduction. But what appears to have upped the ante for pump operators yesterday, is the keen competition for drivers’ dollars in the small local market.

It began, innocuously enough, at 10am.

Nine days after pump prices were lowered by10 cents a litre, ExxonMobil was first to drop prices by 3 cents for petrol and 5 cents for diesel. Caltex matched those cuts at 10.30am, and Singapore Petroleum Company (SPC) followed suit at 11am.

But then, at 2pm, Shell dropped the bombshell: Already unusual in that it was not the first to make the cuts, as it had been the previous five times, the company refused to toe the line that had been drawn. Instead, it slashed petrol and diesel pump prices by 4 and 6 cents respectively.

Its rivals reacted swiftly. Forty-five minutes later, SPC matched the cuts by dropping prices another 1 cent. At 4pm, ExxonMobil did the same and at 5pm, Caltex rounded up the day’s cuts.

Asked why it threw down the gauntlet, as it were, a Shell spokesperson said: “Consumers are very price sensitive ... Usually, companies try to cut and match the prices but we want to be more competitive and give consumers the most competitive prices.”

Petrol companies Today spoke to attributed the price war to the keenly-contested market here.

ExxonMobil’s Asia Pacific Retail sales manager Loh Chee Seng said: “Pump prices move rapidly to reflect market conditions because Singapore’s retail petrol market is extremely competitive.”

“Our consumers are very price sensitive, our geography small, and petrol station networks significantly overlap on another. Under such circumstances, competition is so keen that Esso is compelled to close any price gap very quickly.”

SPC said it “closely monitors market conditions” to “stay current in the retail marketplace”.

The last time such a fast and furious price war took place was in June 2005, when oil companies were offering up to a 26-per-cent discount off pump prices in a single day.

A case of the jitters, for oil companies

If this is the beginning of a new price war, the question is how far companies are prepared to go. And would this change the perception, held by some consumers, of a “cartel-like” system here?

At least one analyst wondered if companies’ reactions were a case of the “jitters”, with crude oil futures dropping yesterday to below US$120 a barrel.

Professor Chou Siaw Kiang, executive director of the Energy Studies Institute, noted how the perceived “closely coordinated group” of oil companies were “discoordinated” in this round of price cuts.

“Perhaps they are not in unison this time round because the rapid drop in oil prices is sending a signal, and there is no time to react in a unified way,” he said. This “signal” is that people are finding ways to adapt their lifestyle around soaring oil prices, such as buying smaller cars and choosing energy efficient equipment.

Or perhaps, there is no connivance at all — Trade and Industry Minister Lim Hng Kiang told Parliament in April the government has no “evidence of collusion among retail petrol companies”.

Forecast Singapore’s economist Vishnu Varatha expects more price cuts from companies in the next three months. Ironically, while this might sound like a respite for drivers, the trend also points to generally weak consumer sentiments and a gloomier world economic outlook. “That is what’s perverse about this,” he said.

Meanwhile, consumers already struggling with inflation are glad for the falling petrol prices.

The Consumer Association of Singapore welcomed this drop, but noted prices are still high as compared to a year ago. “The reduction is not enough” for the average consumer, said its executive director Seah Seng Choon.

For motorist Isabel Chew, 31, however, any dip in pump prices is welcomed relief. “It’s great that pump prices have been dropping quite consistently over these two weeks, given that they have been going up for a while,” the lecturer told Today. Prior to last months’ cuts, prices had risen for 18 months straight. - TODAY/sh