Petrol companies ordered to explain latest price hikes

Petrol companies ordered to explain latest price hikes

PETROL companies have been ordered by the Competition Commission of Singapore (CCS) to explain their latest price rises, which were more than the recent increase in government duty.

The move came after the Consumers Association of Singapore (Case) on Tuesday accused the four players here - Caltex, Esso, Shell and Singapore Petroleum Company (SPC) - of profiteering.

Pump prices across the island were raised by up to 25 cents per litre for 98-octane-grade petrol and as much as 18 cents for 95-octane on Tuesday, a day after the Government raised tariffs by 20 cents a litre for premium-grade petrol and 15 cents for the intermediate grade.

In a strongly worded joint statement to The Straits Times last night, the Ministry of Trade and Industry and CCS said: "We will not hesitate to take firm action against parties who are found to be engaging in anti-competitive behaviours at the expense of consumers."

The CCS was set up by the MTI to enforce competition law here and target anti-competitive practices, such as price-fixing and other abuses of market power.

Petrol firms defended their move, saying that prices are not determined by government excise duties alone.

Shell, which raised the price of a litre of 98-octane-grade petrol by 25 cents to $2.28 per litre on Tuesday, said: "Other factors also impact pump prices... crude oil price, exchange rates, manufacturing and production costs from crude to fuel, distribution costs of bringing the fuel to retail sites, operating costs of running service stations and government goods and services taxes."

At noon yesterday, the firm dropped prices by two cents a litre for its 98-octane-grade.

SPC and Esso, which raised pump prices by one cent more than the tariff amount, said the goods and service tax (GST) needed to be factored in as well. The former said it is actually "charging less than the total of the additional petrol duty plus GST". Both firms have not changed prices since raising them on Tuesday.

Caltex raised prices by as much as the tariff increase on Tuesday, then reduced them by 3 cents later that same day.

Dr Tan Khay Boon, a senior lecturer of economics at SIM Global Education, said petrol firms may be facing higher costs due to rising wages and crude oil prices.

"But if there are no other changes except for the higher petrol tax, then a magnitude of price hike larger than the levy may suggest profiteering," he added.

The benchmark Brent crude came close to a six-year low last month at US$46 a barrel but has since been bouncing back slowly. At 8pm yesterday, Brent was at US$59.16.

Case has sent letters to all four petrol firms here, asking each to explain why they increased prices.

As of last night, no replies had been received.

Mr Seah Seng Choon, Case's executive director, said: "If they cannot explain, I would say that basically, they are profiteering. We reckon that the petrol firms used this (the tax hike) as an opportunity to increase prices and profit."

He pointed out that profiteering is not illegal but added: "As businesses, they need to operate in a responsible way. Increasing prices without proper justification to consumers is not ethical."

Motorist and IT manager Tom Bennett, 38, said: "All the companies raised prices at around the same time, which suggests that there is not enough competition in the market. As a consumer, you want to feel that you have a choice and there is a fair market. It does not feel that way now."

This article was first published on February 26, 2015.
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