Impact of Plunge in Crude Oil Rates on Retail Prices at Petrol Pumps

4 Er Dr Lee Bee Wah asked the Minister for Trade and Industry in light of the plunge in crude oil rates (a) whether current retail prices at petrol pumps reflect this trend; and (b) if not, whether the Ministry will implement measures to ensure petrol companies adjust prices accordingly.

The Senior Parliamentary Secretary to the Minister for Trade and Industry (Dr Tan Wu Meng) (for the Minister for Trade and Industry): Sir, to get petrol at the pump, the crude oil has to be refined and processed. In addition to the cost of refining, there will also be operating costs, taxes, duties and land costs on the one hand, as well as rebates and discounts on the other hand.

Between 2 January 2020 and 9 March 2020, the Brent crude price fell from US$66 to US$34 per barrel. If this price decrease was fully passed through, or in other words, mirrored in retail petrol prices, then retail petrol prices would have dropped by 26 Singapore cents per litre. The listed price of Octane 95 petrol fell by 20 cents per litre, with a slight lag of six days. This represents a pass-through of over three-quarters of the decrease in crude oil price. Based on an in-depth study on retail petrol prices conducted by the then-Competition Commission of Singapore in 2017, a pass-through of around 70% for both price increases and decreases is typical.

Retail petrol prices are determined by the market. Well-informed consumers are a key deterrent against unreasonable pricing decisions. To help empower consumers, the Consumers Association of Singapore (CASE) has launched Fuel Kaki, a retail petrol price comparison website. Fuel Kaki helps consumers compare the effective prices of retail petrol, including various discounts and rebates. This is part of CASE's overall efforts to empower consumers to make better informed decisions.

The Government will continue to ensure well functioning competitive markets and empower consumers to make informed decisions.

Er Dr Lee Bee Wah (Nee Soon): Sir, I have some supplementary questions. I think the general impression, the feedback from residents, is that the decrease in the pump price is always lagging, much slower compared to if it is going up. So, I would like to ask MTI whether this is closely studied? Is there a study commissioned by MTI to see how much is the lag? And if it is true that coming down is always much slower, compared to going up, then maybe MTI should look into how to regulate that. Secondly, there is not much choice; there are only those few oil companies that we have. So, even if you make information available, for those who need to pump petrol, there is not much choice. So, I think MTI will have to come in to help the consumer to make sure that they got the right deal.

Dr Tan Wu Meng: Sir, I thank the Member for her supplementary questions. If we look at the research that was done by the then-CCS, what they found was that the pass-through of an increase in the price of oil – and when you compare the increase with the decrease, the pass-through is about the same. The amount that retail petrol price goes up by, and when you compare that with the amount that it goes down by, as mentioned earlier in my answer.

If you look at the amount of time it takes, actually it takes a little bit longer for the price pass-through to go through when it is upwards. So, the prices take longer to go up on average for roughly the same pass-through, whereas when the price goes down for oil, the pass-through happens a bit more quickly.

So, in summary, basically it takes longer for the pass-through on the upward side, but it is faster when it happens on the downward side. That is the first part of the clarification to the Member's question.

The other point that the Member raised, was about helping our consumers and this is something that CASE has been working on with the Fuel Kaki's website. In the past, when you were comparing the retail price at the pump, the availability of information on discounts and rebates is harder to keep track of – because different suppliers, different promotions – and it was not all together in the same portal.

But today, with the introduction of Fuel Kaki, we have a way for consumers to look at the different rebates, look at the different discounts available and that helps consumers make better decisions because when consumers are aware of the actual effective price with the rebates and discounts included, it helps consumers decide better and that helps make the market function in an even more competitive way.

This is something that we will continue looking at – on how to improve and how to keep on empowering our consumers.

Mr Speaker: Order. End of Question Time. Ministerial Statement. Minister for Health.

[Pursuant to Standing Order No 22(3), Written Answer to Question No 5 on the Order Paper is reproduced in the Appendix.]