Fuel and energy prices likely to remain high even if Middle East conflict ends: Shanmugam

Prices to fuel and energy are likely to remain high even after hostilities in the Middle East cease, Coordinating Minister for National Security K Shanmugam said on Tuesday (April 7). 

This is due to the extent of the damage to oil facilities which will take time to repair, he said, adding that the Ministry of Trade and Industry is monitoring the situation closely. 

More than half of Singapore's crude oil imports come from the Middle East, while nine per cent of natural gas would have been imported from Qatar this year prior to the crisis.

"Even if the Strait of Hormuz fully reopens tomorrow, global oil and gas export capacity will not return to pre-conflict levels so quickly.

"In the longer-term, we are concerned about broader disruptions to global supply chains affecting goods critical to Singapore's economy and essential services." 

Shanmugam, who is chair of the Homefront Crisis Ministerial Committee, was speaking in Parliament during a ministerial statement.

The committee was convened by Prime Minister Lawrence Wong to coordinate Singapore's response to energy disruptions caused by the Middle East conflict. 

Shanmugam said that as part of the Government's "deliberate long-term strategy", Singapore has built up its energy and fuel resilience capabilities over decades. It will be costly, but necessary, he added. 

@asiaone Coordinating Minister for National Security K Shanmugam, who chairs the Homefront Crisis Ministerial Committee (HCMC), explains why Singapore does not presently need to implement fuel rationing measures like some Asian countries. #sgnews #Singapore #Parliament #MiddleEast #War #Energy #Security #Fuel ♬ original sound - AsiaOne

He pointed out that the Republic is the world's third-largest oil trading hub and the sixth-largest refinery export hub, with global energy and trading companies having a "sizeable presence".

Electricity sources are also diversified, said Shanmugam. Apart from the Middle East, Singapore also imports liquified natural gas from Australia, the US and Mozambique.

GasCo, established last year to centralise the procurement and supply of natural gas, has stepped in to replace the disrupted supply from Qatar.

Shanmugam said that there are plans to increase fuel reserves, which have not been tapped since the start of the conflict.

Regulatory changes made in 2023 in the wake of the global energy crisis two years ago has ensured that electricity retailers are able to handle an extended period of gas price volatility.

"The position we put ourselves in before the crisis, and the steps we have taken since the crisis, have helped us remain relatively stable," he added.

@asiaone In his ministerial statement on the impact of the Middle East situation, Coordinating Minister for National Security explained why disruptions to Singapore's energy and electricity supply are unlikely for now.  #sgnews #Singapore #Parliament #MiddleEast #War ♬ original sound - AsiaOne

But the minister warned that potential disruptions to domestic energy and electricity supply cannot be ruled out if supply to Singapore is further affected.

"This remains a low-probability scenario for now though we continue to monitor developments closely," he added.

Shanmugam, however, said that fuel and energy prices will go up.

While Singapore has secured crude oil supplies from alternative sources, the prices are "much higher," he said. Brent crude has surged by up to 70 per cent since the start of the conflict on Feb 28.

"If the conflict is prolonged, then we have to expect much sharper increases in electricity prices."

On diversification of Singapore's energy sources, Shanmugam said the Government will continue to study the potential use of nuclear energy.

"It needs to be studied very carefully, to ensure that it is safe for deployment in Singapore," he said. 

"We have been building up the technical expertise to evaluate the technology as it develops, and we are partnering overseas governments and companies who are in this field. We need the best expertise on this."

Food security is another concern that the ministerial committee is looking into, said Shanmugam. 

@asiaone While Singapore maintains strategic food stockpiles, this is for essential food types, said Coordinating Minister for National Security K Shanmugam on Tuesday (April 7). He urged Singaporeans to be prepared for supplies of some foods from some countries to be unavailable should the conflict drags out. #sgnews #Singapore #Parliament #MiddleEast #War #Food #Security ♬ original sound - AsiaOne

While less than one per cent of Singapore's food supply comes from the Middle East, he said that the disruption could lead to higher costs of fertiliser, food crops and animal feed, which will lead to price increases in imported food products. 

Shanmugam said that Singapore maintains "strategic" food stockpiles to help mitigate the impact of any unforeseen supply disruptions. 

"However, we are only able to maintain stockpiles of essential food types. Singaporeans should be prepared for supplies of some foods from some countries to be unavailable, and will have to exercise flexibility in choosing alternatives," he added. 

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chingshijie@asiaone.com