This article was first published on Jan 13, 2015
Pump prices have fallen again, bringing a litre of petrol back to what it cost in 2009 - the last time crude oil was near the current level of less than US$50 a barrel.
The latest round of price reductions started last Thursday, at Singapore Petroleum Co (SPC) and Caltex. By last Friday, Shell and Esso had followed suit.
Petrol prices were reduced by four cents a litre, while the price of diesel was cut by three cents.
The most popular grade of petrol, 95-octane, is now $1.79 a litre, while the cheapest grade, 92-octane, is $1.75. Prices for 98-octane fuel range from SPC's $1.91 to Shell V-Power's $2.24. Diesel costs $1.29 a litre.
All the prices are before discount, and hark back to levels seen in early 2009 - when oil prices were beginning to recover from the slump of the 2008 global financial crisis.
Brent crude sank to its lowest in the last 10 years in late 2008, when it hit US$47 per barrel - from a record of just over US$140 earlier in the same year. The commodity is now close to that 10-
year low, as a supply glut sends prices diving from a high of US$110 in the middle of last year to fresh 51/2-year lows of under US$49 per barrel yesterday.
Crude has fallen by 55 per cent since last year, but the drop in pump prices is lagging behind. For instance, 95-octane petrol fell a total of 21 per cent from its record-high of $2.28 last June.
Industry watchers attribute this to factors such as profit margin, distribution cost and petrol duties, which tend to mask the full impact of price changes. Oil industry consultant Ong Eng Tong said: "All these things are fixed, and can't be discounted. But if you could exclude them, you'll find that pump prices have fallen in tandem with oil prices."
For instance, if Singapore's petrol duty of 41 cents a litre was excluded, the drop in the price of 95-octane petrol from last June would work out to 26 per cent - five percentage points more than the actual 21 per cent drop.
As for where oil prices are heading, Mr Ong, who has more than 40 years of experience in the industry, said the price drop is not over, but "it should stabilise around US$40".
He said the current slump has more to do with lower demand from big consumers such as China, rather than competition between Saudi oil producers and American shale oil producers.
"It's been cited that shale is unviable when oil gets to US$60," he said. "But technology moves so fast, what's to say that shale oil can't be produced at US$30?"