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    Jan 13, 2015

    Petrol drops to 2009 prices amid oil glut

    PUMP prices have fallen again, bringing a litre of petrol back to what it cost in 2009 - the last time crude oil was near the current level of below US$50 per barrel.

    The latest round of reductions started on Thursday, when Singapore Petroleum Company (SPC) and Caltex cut prices. By Friday, Shell and Esso had followed suit.

    Petrol prices were reduced by four cents a litre, while diesel was cut by three cents.

    The most popular grade of petrol, 95-octane, is now $1.79 a litre, while the cheapest grade, 92-octane, is $1.75.

    Prices for 98-octane fuel range from SPC's $1.91 to Shell V-Power's $2.24. Diesel is $1.29 a litre.

    All the prices are before discount, and hark back to levels seen in early 2009, when oil prices were beginning to recover from the 2008 global financial crisis.

    Brent crude sank to its lowest in the last 10 years in late 2008, when it hit US$47 a barrel - from a record of just over US$140 earlier in the same year.

    The commodity is now close to that 10-year low, as a supply glut sends prices diving from a high of US$110 in the middle of last year to around US$49 now.

    In percentage terms, crude has fallen by 55 per cent since last year, but the drop in pump prices is lagging behind.

    For instance, 95-octane petrol fell a total of 21 per cent from its record high of $2.28 in June.

    Industry watchers attribute this to factors such as profit margin, distribution cost and petrol duties, which tend to mask the full impact of price changes.

    Oil industry consultant Ong Eng Tong said: "All these things are fixed and can't be discounted. But if you could exclude them, you'll find that pump prices have fallen in tandem with oil prices."

    For instance, if Singapore's petrol duty of 41 cents a litre was excluded, the drop in price for 95-octane from June would work out to 26 per cent - five percentage points more than the actual 21 per cent drop.

    Mr Ong, who has more than 40 years' experience in the industry, said the price drop is not over, but "it should stabilise around US$40".

    He said the current slump in prices has more to do with lower demand from big consumers such as China, rather than competition between Saudi oil producers and American shale oil producers.

    "It's been cited that shale is unviable when oil gets to US$60," he said. "But technology moves so fast, who's to say that shale oil can't be produced at US$30?"