Singapore is to benefit from the fall in global oil prices as a result of its position as a net importer of oil, according to Minister for Trade and Industry Lim Hng Kiang.
In his response to questioning from MPs on the impact of lower oil prices in Singapore, Mr Lim commented that a drop in oil prices will translate to lower electricity tariffs and fuel costs, which will directly benefit businesses and consumers.
“For businesses, lower electricity tariffs and fuel costs will help to lower their input costs. This will help improve their margins, and could also dampen the pass-through of business costs to consumer prices,” he said.
Besides lower electricity and petrol costs, this will mean lower inflation for consumers. According to Mr Lim, this could increase consumers’ purchasing power, stimulating consumption and further boosting the economy.
When asked whether prices of public utilities and petrol fairly reflect the fall in oil prices, Mr Lim said electricity tariffs have been reduced as natural gas prices have fallen. “Between July 2014 and January 2015, average gas prices fell by 19 per cent. As fuel costs make up around half the tariff, the electricity tariff between July 2014 and March 2015 has been accordingly reduced by 9.3 per cent,” he stated.
Moreover, petrol pump prices have fallen by 15 percent between July and December 2014, compared with a 41 percent fall in crude oil prices over the same period. “This is because the fuel component of pump prices is not determined by the price of crude oil, but the price of refined products like petrol and diesel,” Mr Lim commented.
“Petrol companies also have to take into account non-fuel costs such as land and labour costs when setting their prices. These are some of the reasons why pump prices fell by a smaller percentage compared to the drop in crude oil prices,” he said.