Petrol firms compete on site, loyalty discounts

We refer to the recent letters in response to the Competition Commission of Singapore's (CCS) study on retail petrol prices.

CCS has not found evidence of anti-competitive agreements among the four petrol companies with regard to pricing, even though the petrol companies do monitor and react to one another's listed price changes.

Moreover, the petrol companies also compete by partnering different credit card companies to offer site and loyalty discounts. When such discounts are taken into account, the effective price that consumers pay varies, as they enjoy a range of discounts averaging around 18 per cent off the listed price for Octane 95.

In comparing petrol prices from June 2014 to January this year, discounts and rebates were, as Mr Steve Goh Han Choon has suggested, excluded ("Show consumers they had a fair deal"; Feb 26).

During this period, the wholesale petrol price (Mean of Platts Singapore (MOPS) price) fell by 53 per cent and the listed price of Octane 95 fell by 15 per cent.

CCS has observed that the MOPS price generally made up less than one-third of the listed petrol price, with non-fuel components making up the other two-thirds.

What this means is that when the MOPS price falls by 53 per cent, the final listed retail price can, at most, be expected to fall by about one-third of the percentage change of MOPS price at 18 per cent, assuming no changes in the non-fuel components.

The non-fuel components of listed petrol price include operating costs, taxes and duties, and land costs. The weighting of these components is commercially sensitive information.

CCS also studied the petrol price movement between Jan 1, 2010, and Jan 31 this year, during which wholesale petrol prices went up and down.

We find that retail petrol price changes move in the same direction as changes in wholesale petrol prices and there was no significant difference in the speed at which prices increased or decreased.

The price changes do not take place immediately but over a 10-day period, on average.

CCS recognises that improved price transparency in the retail petrol market may facilitate easier comparison and more informed petrol-purchasing decisions by consumers.

CCS will be conducting a consumer survey on petrol demand in Singapore to understand consumer choices and switching behaviour on petrol purchases, and will incorporate this into the final report.

CCS continues to monitor the retail petrol market and is ready to take action if there is evidence of any anti-competitive behaviour.

Herbert Fung

Director (Business and Economics)

Competition Commission of Singapore

A version of this article appeared in the print edition of The Straits Times on March 11, 2016, with the headline 'Petrol firms compete on site, loyalty discounts'. Print Edition | Subscribe