Is Petrol in Singapore Overpriced?
March 30th, 2011 |
http://www.temasekreview.com/2011/03/30/is-petrol-in-singapore-overpriced/
Is Petrol in Singapore More Expensive?
Is petrol overpriced relative to diesel at the pump in Singapore as compared to other countries in the region, for example Hong Kong?
In Hong Kong premium petrol (98R grade) retails at HK$16.04/liter at the pump currently, while diesel (Euro V) sells at HK$11.52/liter (all before discounts). Premium petrol (or gasoline) carries an excise duty of $6.06/liter, whereas there is none for the Euro V grade diesel. This is an incentive to adopt a more environmentally friendly grade of diesel. On this basis, petrol (at $9.98/liter before duty) is cheaper than diesel by about 13% at the pump.
But in Singapore, petrol prices (before excise duty) are generally higher than diesel. Currently, premium grade petrol (98R grade) which has an excise duty of $0.44/liter retails at $2.14/liter, whereas diesel retails at $1.64/liter (all before discounts). There is no excise duty on diesel at the pump; instead a special diesel tax is levied on diesel vehicles. Singapore presently adopts the less stringent Euro standards (as compared to Hong Kong) for its petrol (Euro II) and diesel (Euro IV).
(Note: The cost of production of Euro V diesel would be higher than that of the Euro IV grade; the same would also apply for Euro IV petrol against the Euro II grade. The order of magnitude increase for both diesel and petrol would be similar.)
Hong Kong imports its entire fuels requirement; generally there is a time lag before the retailers adjust their pump prices to reflect changes in the international market prices, unlike the situation in Singapore where changes in pump prices are more much current with the changes in the market prices. In this sense it would be more
meaningful to compare the February (last month) price levels in Singapore against the Hong Kong’s current levels.
For the first three weeks in February, the pump prices here for petrol (98R grade) and diesel were $2.08/liter and $1.493/liter respectively. The price increase in the later part of the month narrowed the price gap by about $0.04/liter. Nonetheless, the price for petrol would still be relatively higher than that for diesel by about 10%.
Over in Australia, the wholesale prices of petrol (91R) and diesel, average for the month of February, were A$1.27/liter and A$1.31/liter, respectively. (Statistics are obtained from the AIP’s website). Petrol and diesel carry the same excise duty over there. Australia has the same (more stringent) Euro standards for its petrol and diesel as Hong Kong.
In comparison, the pump price for the lower 92R grade petrol in Singapore in the first few weeks of February was $1.947/liter (this grade has a lower excise duty of $0.41/liter) – which makes it about 3% more expensive than diesel. While the price gaps between petrol and diesel may have narrowed with the recent price increases, petrol is still relatively more expensive than diesel here.
The fuel retail market in Singapore is an oligopoly, a market structure with few sellers – there are only four retailers here, with two of them holding a combined 64% market share of the total number of petrol stations. In an oligopoly, market strength generally lies with the sellers, and this is evident here where the retailers are quicker to raise prices when crude oil prices rise but slower to react when prices fall.
But the diesel and petrol retail markets in Singapore are not similar. There is greater competition in the diesel market; because some of the taxi operators sell diesel to their own taxis. This could have put more pressure on the retailers’ margin for diesel relative to that for petrol.
Would introducing more competition in the petrol retail market here help to redress the balance of powers between consumers and sellers and drive it towards a more efficient competitive market? After all, petrol as well as diesel is more or less a fungible product, as motorists can easily switch from one brand to another.
Can those taxi operators be allowed to extend their business to include retailing petrol as well to the general motoring public? Or perhaps a large co-operative could take up the challenge to retail gasoline?
This could be a case for the powers that be to ponder?
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Karl Foo
I like this comment.
atobe:
March 30, 2011 at 3:23 am (Quote)
‘Profiteering’ – is the word to describe the status quo in Singapore, and done so with the quiet nod of the government, whose finger is stuck in the petroleum pie, with the government drawing a huge revenue from the sale of petrol considering the large number of cars owned in Singapore.
When one considers that Singapore is the Refining Centre for the entire Southeast and East Asia – as well as Australiasia, it is shocking that Singaporeans will be forced to continue paying for such high petrol and diesel prices compared to Australians – who will purchase all of their petrol requirements from Singapore.
Singapore sells refined petrol and diesel to the Australian consumers, who has to pay for shipping cost and government taxes.
Yet Australians pay far less for petrol then Singaporeans – as seen in a weekly report published by the Australian Institute of Petroleum [*1].
In the report for the week ending on 18 March 2011, ‘unleaded petrol’ is sold in the various Australian cities at the following prices -
Sydney : A$1.346 or S$1.75411 per litre
Melbourne : A$1.341 or S$1.74759 per litre
Brisbane : A$1.341 or S$1.74759 per litre
Adelaide : A$1.344 or S$1.75150 per litre
Perth : A$1.352 or S$1.761926 per litre
Darwin : A$1.380 or S$1.798416 per litre
Hobart : A$1.384 or S$1.803628 per litre
Diesel prices sold at the various Australian cities for the same week ending on 18 March 2011 were:
Sydney : A$1.426 or S$1.85836 per litre
Melbourne : A$1.416 or S$1.84533 per litre
Brisbane : A$1.42 or S$1.85054 per litre
Adelaide : A$1.42 or S$1.85054 per litre
Perth : A$1.431 or S$1.864879 per litre
Darwin : A$1.458 or S$1.90006 per litre
Hobart : A$1.468 or S$1.91309 per litre
The above is based on an exchange rate of A$1.00 = S$1.3032 based on the exchange rate published by DBS on 29 March 2011.[*2]
Compare the above with the retail petrol and dieself prices published by Singapore Petroleum Corporation (SPC) up 22 March 2011, 1200hrs [*3] as seen below – and which do not change significantly week to week: (Note the prices shown below may change on a daily or weekly basis and published in SPC website)
ULG 98 @ S$2.140 per litre
ULG 95 @ S$2.090 per litre
ULG 92 @ S$2.040 per litre
Diesel @ S$1.640 per litre
On average, Singaporeans are paying more then 30 cents per litre for petrol, and SAVE about 20 cents on diesel.
Ironically, despite lower diesel costs in Singapore, we are continuously told that fuel price increases have forced the transport companies (owned by Temasek) to demand upward revision of fare prices !
Singaporeans are also told that high petrol prices are used as a disincentive for the ownership of cars, despite the fact that COE is already an instrument to control the orderly growth of the size of the car population in Singapore.
The COE hypocrisy is hard to swallow when this has become another lucrative revenue source for the Singapore government – as it manipulate the COE bid prices, even when the claim is made that the COE price is based on market sentiments that reflects the average of bid prices.
Unfortunately, with the known ‘DUPLICITY’ of this government formed by the “Pro Alien Party” that is reknown for its ‘non-accountability and non-transparency’ – only DAFT Singaporeans will believe this statement from the government !
Was the truth being told to Singaporeans that it was to prevent easy access to cheap petrol and affect the car population control plans – that the rule was imposed for a ‘minimum 3/4 tank limit’ before crossing the Causeway into West Malaysia ?
Or was it not a simple case of the Singapore Government protecting its own stakes, and for the interests of the local petroleum industries from losing market share, when there is no control on Singaporeans crossing the Causeway to top up in West Malaysia ?
When free market conditions do not work in the interests of this Singapore Government, they will shamelessly interfere in the market mechanism to correct the outcome to achieve its own agenda.
The big picture is to milk Singaporeans in a captive market of total dependency on a system that is designed and controlled by the “Pro Alien Party”.
It is either a clueless or dishonest SM GCT who will shamelessly blame Singaporeans for being over-dependent on the Government.
.
.
[*1] ‘Australian Institute of Petroleum’ see PDF Pg 5 of 8
http://www.aip.com.au/pricing/pdf/Weekly%20Petrol%20Prices%20Report%20-%2020%20March%202011.pdf
http://www.aip.com.au/pricing/international.htm
[*2] ‘DBS Bank Foreign Exchange Rate’
http://www.dbs.com/ratesonline/Pages/fxbra.aspx
[*3] ‘Singapore Petroleum Corp’
http://www.spc.com.sg/home/home.asp
Instead of focusing on using prices, taxes, COEs to control car population, maybe the universities should be concentrating research on tiny electric people movers with hot swappable battery packs. Singapore is the perfect place to develop such technology as we have no Hinterland to pull tractors and do farming. The people movers should also be modular to allow more or less cargo/passenger space, depending on how many units you click together. The average speeds should be slow enough ensure safety and yet allow teens to drive without a license. Automatic modes should be the ultimate goal. with multi tiered above ground expressways Not more SBS, SMRT. The underground space liberated can be better made use of for living space instead of train tunnels.