No evidence of collusion in petrol prices: Competition Commission

SINGAPORE — Petrol companies pass on about 70 per cent of wholesale petrol price changes to consumers, the Competition Commission of Singapore (CCS) said on Tuesday (Feb 23), and there is no evidence to suggest the four players here conspire to fix prices, although they do monitor and react to each other’s published prices.

The CCS said that a study into the retail petrol market commissioned last year showed that retail petrol prices moved in tandem with wholesale petrol prices over a six-year period between Jan 1, 2010 and Jan 31, 2016. And although the pass-through was neither complete, nor immediate, it said that the effect was the same, whether wholesale petrol prices increased or decreased.

For every 10 cent change in the wholesale price of petrol, pump prices moved by 7 cents in the same direction, CCS said, adding that this took place over a 10-day period on average.

“Based on the information gathered, there is no evidence to suggest collusion in petrol pricing …. There was no significant difference between the time taken to raise the listed price and the time taken to lower the price,” CCS said in a release.

The petrol companies — Caltex, Esso, Shell and Singapore Petroleum Company (SPC) — do not base their pump rates on prices of crude oil, or unrefined oil. Instead they use Mean of Platts Singapore (MOPS) price, which refers to the cost at which they purchase refined wholesale petrol from refineries. MOPS price tends to be more expensive than crude oil, as it includes the cost of refining the crude oil into wholesale petrol.

Also, other components of retail petrol price include operating costs, taxes and duties, land costs, discounts and rebates. The prices of these non-fuel components, CCS said, have generally increased in the past few years.

“The lack of complete pass-through could be due to factors, such as changes in the non-fuel components. 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 said.

The CCS report, however, does not come as a consolation for consumers.

“Notwithstanding the CCS report, consumers are of the view that petrol companies should have done better in adjusting their prices more responsively when crude oil price decreases .... Although the CCS said that there is a relatively high level of pass-through of the fall in MOPS prices to consumers over the period, there could have been more pass-through if there was greater competition,” Mr Seah Seng Choon, Executive Director of Consumer Association of Singapore (CASE) told TODAY.

Mr Lee Yongyuan, a regional sales manager in the manufacturing industry said: “In the past, when crude oil prices increased, petrol prices would increase quickly too. But when crude oil prices come down, I don’t see that kind of quick response from petrol companies.”

Crude oil prices have declined by more than 70 per cent from a high of S$160 in 2014 to about S$40 this year, Mr Seah pointed out. In comparison, pump prices for the most popular petrol grade, octane 95, fell about 20 per cent from a high of S$2.28 in 2014 to S$1.82 this month.

“Obviously, consumers feel that there is still room for petrol companies to adjust their prices downwards. Due to the poor competitive environment, petrol companies tend to set their prices similar to one another without fear of losing their market share,” Mr Seah added.

In February last year, CCS asked petrol companies to explain their price increases, which were more than the hikes in government duty. This came after CASE had accused them of profiteering.