No evidence of petrol price fixing, S'pore competition watchdog finds

Singapore

WHILE crude oil price fell by an average 59 cents per litre in the past two years, consumers paid 45 cents less for 95-octane fuel, according to interim findings of the Competition Commission of Singapore (CCS).

"There appears to be a relatively high level of pass-through of the fall in MOPs (wholesale price) to the consumers over this period," the watchdog against anti-competitive practices said in a press release on Tuesday.

Over a longer six-year period, CCS - which comes under the Ministry of Trade and Industry - found that when the wholesale price of petrol changes by 10 cents, the cost of fuel moves seven cents in the same direction.

But the competition regulator found no evidence to suggest collusion in price fixing - even though the four oil majors that supply petrol here monitor and react to each other's published prices.

The CCS findings, based on price movements from January 2010 to January 2016 and pending a final report to include a study on petrol demand, came a year after the oil companies - Caltex, Esso, Shell and Singapore Petroleum Company - were accused of profiteering when they raised pump prices more than a hike in government duty.

Pump petrol prices have dipped, but not as much as those of crude oil, which hit their lowest in a decade. A barrel of Brent crude now is about US$34.

But the petrol companies use Mean of Platts Singapore (MOPS) prices, or wholesale prices of refined oil in their cost accounting and pricing for pump petrol - not crude oil prices. And MOPS price tends to be higher than crude oil price because it includes the cost of refining the crude oil into wholesale petrol.

The MOPS price is determined by markets research firm Platts through market forces.

CCS said MOPS price accounted for under a third of the listed retail petrol price last year. The rest were made up of operating costs, taxes and duties, land costs, discount and rebates.

"These non-fuel components have generally increased in the past few yeas," CSS said. "The operating income margin of the petrol companies has also increased, but the increase is smaller relative to the increase in the non-fuel components."

CCS found consumers generally enjoyed discounts and rebates off the listed price for 95-octane petrol - and these amounted to an average 18 per cent in 2014.

"The listed retail petrol price was observed to move in tandem with the price of MOPS over a six-year period between 1 January 2010 and 31 January 2016," CCS said. "While the pass-through was neither complete nor immediate, the effect was the same whether the price of MOPS increased or decreased."

It said the lack of complete pass-through could be due changes in the non-fuel components.

"There was no significant difference between the time taken to raise the listed price and the time taken to lower the price," CCS added.

According to CCS, when the crude oil price dropped 59 cents per litre, or 67 per cent, between June 2014 and January this year, the MOPS price fell 52 cents or 53 per cent and the listed price of octane 95 slipped 35 cents, or 15 per cent.

"After taking into account the discounts, rebates and levy increase in February 2015, the effective price that consumers paid for octane 95 was found to have fallen by 45 cents (24 per cent) instead," CCS said.