S’pore will ‘benefit from lower oil prices’

SINGAPORE — The fall in oil prices is good news for the Republic as it translates into lower electricity tariffs and fuel costs, which will directly benefit businesses and consumers, Minister for Trade and Industry Lim Hng Kiang said in Parliament yesterday.

“For businesses, lower electricity tariffs and fuel costs will help lower their input costs. This will improve their margins and could also dampen the pass-through of business costs to consumer prices,” Mr Lim said in response to questions from several Members of Parliament on the impact of the lower oil prices on Singapore.

“Consumers, on their part, will benefit from lower spending on electricity and other oil-related items such as petrol. Lower inflation could also increase their purchasing power, stimulating consumption,” he added.

Brent crude, the global oil benchmark, has fallen from a peak of about US$115 a barrel last June to about US$50 recently.

As the price of natural gas — which is the main fuel used for electricity generation in Singapore — has fallen in tandem with oil prices, the electricity tariff has likewise been adjusted downwards, Mr Lim noted, adding that there are regulations to ensure the utilities sector fairly takes into account fuel costs when revising the rates.

Between July last year and January this year, average gas prices fell by 19 per cent, Mr Lim noted. Accordingly, the electricity tariff between July last year and March this year also fell by 9.3 per cent, he said.

At the pump, prices declined by 15 per cent between July and December last year. Although this is a smaller percentage when compared with a 41 per cent fall in crude oil prices over the same period, the fuel component of pump prices is not determined by the price of crude oil, but by the price of refined products such as petrol and diesel, Mr Lim said. Additionally, petrol companies also take into account non-fuel costs such as land and manpower when setting prices, he said.

Separately, Mr Lim said the recent rise in the United States dollar and the fall in the euro should not have a significant impact on the local economy, as the central bank manages the Singapore dollar’s exchange rate against a trade-weighted basket of currencies within a prescribed policy band and does not focus on any specific bilateral currency pair. “Instead, demand conditions in our major export markets would have a more significant impact on Singapore’s growth prospects. We expect the strengthening of the US economy, which underpins the appreciation of the US dollar, to bode well for the Singapore economy.”