S’pore to up fuel reserves; electricity prices will rise sharply if Mid-East conflict is prolonged: Shanmugam

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SINGAPORE – Singapore plans to increase its fuel reserves as the Middle East conflict continues, but oil prices are likely to remain high even after hostilities cease, said Coordinating Minister for National Security K. Shanmugam.

If the conflict is prolonged, then much sharper increases in electricity prices are expected.

And while stockpiles are maintained for essential food types, Singaporeans should be prepared for foods from some countries to be unavailable, and should be flexible in choosing alternatives, he said in Parliament.

The long-term groundwork laid by Singapore and the steps taken since hostilities escalated have helped the country remain relatively stable despite disruptions to fuel and energy supplies, Mr Shanmugam, who is also Home Affairs Minister, told the House in a ministerial statement on April 7.

The country has not had to draw on its fuel reserves or implement fuel rationing measures yet, he noted. It has also taken steps to reduce risks to disruption of supplies to meet its electricity needs.

But if supply disruptions increase, and if more suppliers are unable to provide fuel or gas, then potential disruptions to domestic energy and electricity supply cannot be ruled out, he said.

While this remains a low-probability scenario for now, the authorities are continuing to monitor developments closely.

Mr Shanmugam pointed out that electricity prices have been cushioned by several factors, including the diversity of sources the country draws from, and the fact that Singapore’s power plants can switch from natural gas to diesel when needed. Most, or 95 per cent, of the Republic’s electricity is generated from natural gas.

The Energy Market Authority also strengthened regulatory requirements for electricity retailers in 2023 to ensure they are sufficiently hedged and will be better able to handle an extended period of gas price volatility.

Singapore is planning to increase its fuel reserves, said Mr Shanmugam, adding: “It will be costly, but we think it necessary.”

The nation’s fuel reserves consist of a mix of natural gas and diesel, with some owned by the Government and others by power generation companies.

“But prices will go up,” he added, pointing out that even though the cost of gas accounts for almost half of the regulated tariff, this has so far been only partially transmitted to the tariff price.

“If the conflict is prolonged, then we have to expect much sharper increases in electricity prices.”

Mr Shanmugam’s statement followed those by Deputy Prime Minister and Trade and Industry Minister Gan Kim Yong, as well as Acting Transport Minister and Senior Minister of State for Finance Jeffrey Siow, all discussing measures to address the impact of the conflict on Singaporeans.

Mr Shanmugam laid out the work of the Homefront Crisis Ministerial Committee (HCMC), which he chairs. It is the top steering body for national crisis management and has been looking into issues including energy, food and supply chain resilience, security developments, foreign affairs, and support for Singaporeans.

Over the past month, Mr Shanmugam said, the HCMC and Homefront Crisis Executive Group – which coordinates across government agencies to anticipate potential emergency scenarios, ensure the necessary contingency plans are prepared, and respond to the impact of any home-front crisis or emergency – have met a few times.

Fuel and energy security

On fuel and energy security, he noted that while several countries have announced export restrictions on fuel or implemented rationing measures, Singapore has not done so. So far, there has been no need to do so, he said.

As the result of a decades-long strategy, Singapore is “deeply connected to global flows of energy”, giving it access to diverse sources of energy and fuel supplies, he said.

It is the world’s third-largest oil trading hub and sixth-largest refinery export hub – and continues to have access to crude oil. Singapore has also been meeting its domestic needs and international obligations for fuel.

“However, we do not know how long the disruptions will last,” he said. “No one can say what the situation will be like if there are more serious disruptions, and they last longer.”

Singapore has secured crude oil supplies from alternative sources, albeit at a higher cost, with Brent crude – the global oil benchmark – surging as much as 70 per cent since Feb 28, when hostilities heightened. More than half of the nation’s total crude oil imports come from the Middle East.

Even as Singaporeans are feeling the impact of higher prices as fuel and energy costs rise, the minister warned, prices are likely to stay high even after hostilities cease. This is because damage to infrastructure in the Middle East, such as large oil facilities in Saudi Arabia and Bahrain, will take time to fix.

“Even if the Strait of Hormuz fully reopens tomorrow, global oil and gas export capacity will not return to pre-conflict levels so quickly,” he said, noting that the authorities are concerned about broader disruptions to global supply chains affecting goods critical to Singapore’s economy and essential services. Many other critical supplies pass through the Strait of Hormuz, including helium and aluminium.

“We can no longer rely on such supplies in the same way,” he said.

The Ministry of Trade and Industry is monitoring the situation closely and working with the relevant industries, he added.

On Singapore’s energy security, he said the Republic will continue to play a role as a refining hub.

“We remain committed to de-carbonising our economy,” he said, but added that the nation’s path to net zero will depend on technological breakthroughs and sustained international cooperation.

“For now, the priority worldwide is energy security. Countries everywhere need to keep the lights on.”

In the medium to long term, the Republic is assessing other sources of energy to diversify its energy sources and fuel mix – including nuclear energy as a potential source. “But adopting nuclear energy requires very serious consideration,” he said, adding that dedicated teams in the Government will continue to study this “carefully and rigorously”.

Food security

On food security, Mr Shanmugam said the Government maintains strategic food stockpiles that will help mitigate the impact of unforeseen supply disruptions – and Singapore is relooking supply chains to strengthen them.

“However, we are only able to maintain stockpiles of essential food types,” he said, adding that food supplies from some countries may become unavailable, and Singaporeans should exercise flexibility in choosing alternatives.

As for questions that have been raised about the extent of Singapore’s fuel reserves and stockpiles, Mr Shanmugam said these are not disclosed as a matter of policy.

“Disclosing such details would reveal where our limits lie, and that could be used against Singapore in times of crisis,” he said. “What matters is that we have sufficient buffers and contingency plans in place.”

Safeguarding Singaporeans

In the light of the heightened threat environment, Mr Shanmugam outlined several efforts by various ministries to safeguard citizens.

Increased security checks have been introduced at checkpoints, and police have stepped up patrols in areas of concern.

Singaporeans in the Middle East affected by the conflict were also brought home on four repatriation flights in March, organised by the Ministry of Foreign Affairs and Ministry of Defence.

As flights in the region continue to face cancellations and disruptions, the Ministry of Culture, Community and Youth and the Islamic Religious Council of Singapore, or MUIS, have also engaged with Singaporean residents and relevant travel agencies on umrah pilgrimage trips and haj arrangements, he added.