Christopher Tan, Straits Times 16 Feb 08;
WHOEVER said what goes up must come down probably did not have pump prices in mind.
When crude oil prices rise, pump prices follow suit shortly. But when crude prices soften, oil firms are painfully slow in lowering pump rates.
That has been one of the perennial peeves of motorists here. To add insult to injury, oil firms cite higher oil prices when they raise pump prices, but later say crude oil is but one of several factors influencing petrol prices.
What can consumers do?
Unlike providers of other goods and services which are sometimes 'sticky downwards' (like home loans), the oligopolistic oil industry knows the customer does not have the luxury of choice. After all, oil firms today price their fuels identically - at least in Singapore.
Even Singapore Petroleum Co, which offered lower prices when it entered the petrol station business in the 1980s, stopped the practice soon after it grew in size by acquiring British Petroleum's retail network here in 2004.
Pump prices hit record levels of around $2 a litre last November. They have stayed at that level despite weaker demand for motoring fuels in China and America - two of the world's biggest petrol consumers - in recent weeks.
Last month, the Consumers Association of Singapore (Case) wrote to the oil companies to ask why pump prices have not been adjusted to reflect the recent downtrend in crude prices. It did not receive a reply.
The man on the street can identify with Case's powerlessness. He can rant and rave all he wants, but there is next to nothing he can do about how fuels are priced. Last month, some netizens here proposed a 'No Petrol Day' on Jan 24. The idea was to stop filling up for a day, so as to create a surplus in the fuel inventory and thus force oil companies to lower prices. It did not take off.
There is also precious little industries and businesses can do about the price of oil and the prices of products pegged to oil prices, like natural gas and cooking gas. Natural gas is used chiefly for power generation here, and its price affects utility bills.
Cooking gas, which is liquefied petroleum gas here, has gone from $18 per cylinder (12.7kg home size) to over $30 in less than five years. Housewives grin and bear it.
In essence, there isn't really much anyone in the world can do about runaway oil prices. In some ways, not even the oil companies can do much.
Oil prices are no longer influenced solely by fundamental factors such as supply and demand. The world is not experiencing an oil shortage.
Instead, speculative buying and selling by traders and hedge funds have been largely responsible for pushing crude from under US$30 a barrel in 2003 to nearly US$100 at end of last year.
Oil producers and oil firms are not exactly complaining though. The record crude prices have been excellent for their bottom lines. American oil giant ExxonMobil, for instance, declared net incomes of US$39.5 billion (S$56 million) and US$40.6 billion for 2006 and 2007 respectively.
That is after paying taxes of US$28 billion and US$30 billion respectively - amounts not many national treasuries can turn their noses up at.
Despite the record prices, though, demand for oil has been fairly inelastic. Oil producers know that. And therein lies the main problem.
As simplistic as it sounds, the world is just too dependent on oil. The G-7 has itself to blame for not taking the lead in weaning the world off fossil fuels - despite scares such as the 1970s oil crisis. Hence it is as much of a hostage today to oil producers as it was 40 years ago - perhaps even more so.
According to the US Energy Information Association, the world consumed 207 million billion Btu of energy in 1970. Today, that figure has more than doubled. Yet, renewables (such as hydro, wind, solar and thermal energy) account for just 7 per cent or so of total consumption.
The impetus to increase the share of renewables in the energy pie is gathering momentum, though. The private sector has much to offer, if examples set by Sir Richard Branson are anything to go by.
The British entrepreneur has pledged US$3 billion to fight global warming; and is offering a US$25 million prize to anyone who can come up with a way to remove one billion tonnes of carbon dioxide a year from the atmosphere.
Here in Singapore, the Government has partnered Britain's Rolls-Royce plc in a $100 million venture to invent fuel cell generators. It is the biggest endeavour here to reduce oil dependence.
A lot more can be done, of course, and a lot more should be done. It is about time the world kicked its centuries-old fossil fuel habit.
But back to the man in the street. Is he really powerless? Not really. He can cut back on air-con use at night, plan car journeys better and switch to energy-efficient appliances. He may not be able to bring the oil firms to their knees, but with a little effort, he can cut back on his personal expenditure.
