Relief measures soften energy price hikes: Iswaran

Alvin Foo, Straits Times 13 Jan 10;

SINGAPORE cannot be insulated from volatile global energy prices, but measures are in place to mitigate the impact of price rises on households, said the Senior Minister of State for Trade & Industry, Mr S. Iswaran.

He told Parliament yesterday that liberalising the power generation sector has injected diversity into the market, and competition helps combat cost increases.

'We cannot insulate Singapore from the global energy market and the long-term trends or volatility in global energy prices,' he said in response to questions from Nominated MP Viswa Sadasivan and Madam Ho Geok Choo (West Coast GRC).

'Volatility is something we must get used to. The long-term trend is probably upward, because of the various fundamental pressures like more demand for energy from developing markets,' he added.

Measures such as the Utilities Save rebate scheme, which can be used to directly offset utility charges, can help households cope with price rises, he noted.

The competition, which came as a result of the opening up of the sector in 2001, also helps to combat price increases.

He said: 'Our market is a strong one, competitive one, so we are able to eke out as many efficiencies as we can.'

Liberalising the sector has benefited consumers, as it has brought efficiency gains because the new players compete to bring costs down.

These lower costs have benefited consumers directly, said Mr Iswaran.

For instance, over the past eight years since the liberalisation of the electricity market, the price of fuel oil has increased by 160 per cent. Yet, the electricity tariff for households has increased by only 15 per cent.

Moreover, opening up the sector has enriched the market with a diverse range of players bringing different technologies and experience.

'Since liberalisation, we have seen the entry of new power generation companies. Keppel Merlimau Cogen has entered the market, and Island Power is planning to do so ... power generation companies have moved towards newer and more efficient technologies,' said Mr Iswaran.

Before liberalisation, most of Singapore's electricity was generated by steam plants powered by fuel oil, he noted. Now, more than 80 per cent is generated by combined cycle plants fuelled by natural gas.

'Such gas-fired plants enjoy better efficiencies that translate into lower costs. These lower costs have benefited consumers directly,' he added.

Pump prices near $2 mark
Trend may ignite interest in fuel-efficient cars and cheaper grades of petrol
Straits Times 13 Jan 10;

PUMP prices are inching towards $2 territory, a level that is likely to reignite interest in fuel-efficient cars and cheaper grades of fuel.

Yesterday, Caltex and ExxonMobil led the pack when they jacked up prices by five cents a litre.

The move, the latest in a series of unremitting increases that began in the second half of last year, brought 98-octane petrol to $1.94 a litre. The two companies' 95- and 92-octane grades of petrol are now $1.857 and $1.797 a litre respectively. Diesel is at $1.323. All rates are before discounts. The other two fuel companies are expected to follow suit soon.

Petrol last touched the $2 level briefly in August last year, but eased soon after.

But with crude oil prices now around 10 per cent higher than they were in the middle of last year, analysts expect pump prices to remain firm this year.

Crude oil for February delivery was nearly US$84 a barrel on the New York Mercantile Exchange on Monday - the highest since October 2008, when global financial institutions began unravelling.

Although oil futures eased early yesterday on news of higher temperatures and a lower US employment rate, the commodity's mid- to long-term outlook is bullish.

Mr Ng Weng Hoong, editor of energy news portal EnergyAsia, said he expects crude to touch US$100 a barrel this year. At its peak in July 2008, a barrel of crude cost US$147, pushing pump prices here to an all-time high of $2.50. 'The speculators are back, and so is the rush to stockpile,' he said, adding that China will continue to soak up a lot of demand.

The world's biggest energy consumer after the United States, China imported a record 203.8 million tonnes of oil - or 4.1 million barrels a day - last year, according to the Bloomberg news service.

Oil brokers here expect the commodity to move between US$75 and US$85 in the first quarter, but say it is likely to stay above US$80 in the near term.

The higher pump prices are expected to nudge motorists towards cars that are more fuel-efficient.

Mr Vincent Ng, product manager with Honda agent Kah Motor, said that while buyers are now better informed about fuel efficiency, it is still not the overriding factor.

'As much as we want to create fuel economy awareness, the buying decision is still ultimately driven by car prices,' he said. 'But when all things are equal, the car with better economy wins.'

Mr Colin Yong, the spokesman for Volkswagen Centre Singapore, said VW's small turbocharged cars are proving to be popular. But he said buyers are more 'sold on the low road tax' of these 1.4-litre cars, vis-a-vis rivals' 1.6-litre cars.

Oil industry players expect motorists to shift towards cheaper, lower-octane fuels.

Since pump prices began climbing steeply in 2007, motorists have moved increasingly away from 98-octane petrol.

The trend prompted Chevron, which markets the Caltex brand here, to re-introduce 92-octane fuel last March.

More are expected to switch to the budget fuel once pump prices breach $2, widely seen as the tolerance level here.

CHRISTOPHER TAN