Pump prices don't reflect competition in industry

I cannot agree more with Mr David Goh Chee Hoe about pump prices in Singapore (Pump rates stay high despite sharp drop in oil price; Oct 31).

The Competition and Consumer Commission of Singapore (CCCS) stated in 2016 that there is no evidence of collusion to set pump prices by the major players in the industry (No evidence of cartel' among petrol companies; March 1, 2016).

Even if Singapore's competition watchdog has found no evidence of deliberate connivance, the fact that petrol companies quickly follow one another in raising prices above the level that they should is plain for all to see.

Frequent promotions or even press releases by a retailer, which are ostensibly to inform motorists of price changes, may actually be to signal prices to competitors instead.

The oligopolistic structure of the fuel retail market also makes it difficult to establish a case of collusion.

In such markets, the price of petrol generally moves up in tandem with the increase in crude oil prices, but does not appear to fall as quickly when these same wholesale prices drop.

In 2011, the Federal Cartel Office in Germany accused petroleum multinational companies BP, ExxonMobil, Shell, ConocoPhillips and Total of operating an oligopoly that effectively cornered up to 65 per cent of the market.

The German competition watchdog concluded from an extensive study that pump prices at major petrol stations do not reflect competition in the industry.

Even though the CCCS has yet to find evidence of deliberate collusion among the petrol companies in Singapore, there is a lack of significant variation in pump prices.

Drivers should take into consideration factors like discounts, rebates and freebies before deciding where to fill up their vehicles.

This may lead to retailers having to constantly improve their promotions and give customers better returns on the money spent on their fuel.

Edmund Khoo Kim Hock

A version of this article appeared in the print edition of The Straits Times on November 27, 2018, with the headline 'Pump prices don't reflect competition in industry'. Print Edition | Subscribe