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No evidence of anti-competitive behaviour by petrol firms in S'pore: Tan Wu Meng
THERE is no evidence of anti-competitive behaviour by petrol companies in Singapore, and a fall in crude oil prices may not always mean a drop in retail petrol prices, said Senior Parliamentary Secretary for Trade and Industry Tan Wu Meng in Parliament on Tuesday.
When crude oil is refined, it separates into different products in roughly fixed proportions, so changes in demand for some refined products can affect others, he said in response to a question from Member of Parliament Ang Wei Neng.
For instance, demand for jet fuel has fallen dramatically due to global travel restrictions, meaning that refineries must store the excess jet fuel supply, reduce the price so as to sell more, or reduce the production of jet fuel.
Storing excess supply requires space, and reducing the price will not help if jets are simply not flying. If refineries decide to reduce the production of jet fuel, this will also reduce the production of other refined products, including retail petrol. The lower supply of retail petrol would thus exert upward pressure on prices, said Dr Tan.
Another factor is that if refineries are still processing crude oil purchased before prices fell, there may be a lag before the lower crude oil prices pass through to end products.
Furthermore, the price that consumers pay for petrol also depends on petrol companies' operating costs, land costs, duties and taxes, and discounts and rebates, said Dr Tan, noting a 2017 study that found refined petrol costs accounted for less than a third of the listed retail petrol price.
As for Mr Ang's question as to whether there are indications that the major oil companies in Singapore behave like an oligopoly, Dr Tan said that partly due to the Republic's small market, an oligopolistic-type structure can be found in several sectors, including supermarkets and cinemas.
While harm can arise from an oligopoly model if there is anti-competitive behaviour, Dr Tan cited a 2017 study by the Competition and Consumer Commission of Singapore (CCCS) that found that while major petrol retailers do regularly monitor and respond to each other's prices and promotions, prices do not always move in tandem among them.
There was also no observable pricing patterns, such as a clear price leader, either for price increases or price decreases, he said. CCCS is monitoring closely and will take enforcement action should evidence of anti-competitive activity surface, he added.
Mr Ang asked if fuel companies could be made to publish breakdowns of their cost components, and noted the perception that pump prices do rise when oil prices do.
Dr Tan replied that the empirical evidence does not suggest the listed retail price adjusts downwards slower or by a smaller amount compared to upward price adjustments. The 2017 study found that adjustments to listed prices took place over eight days for increases and six days for decreases.
As for cost breakdowns, some of this could be commercially sensitive, but the government "is prepared to work with Case (Consumers Association of Singapore), agencies and companies to see if there are ways to put more of this information out there".