OIL PRICE INCREASE (Effect on economy)

Mr Ang Nam Piau asked the Minister for Finance to what extent our economy will be affected by the proposal of Saudi Arabia to increase its oil price by five per cent on 1st July, 1977.

Mr Barker: (for the Minister for Finance): Mr Speaker, Sir, I have been asked to reply on behalf of the Minister for Finance. There has been no official announcement by Saudi Arabia to increase its oil price by 5% on 1st July, 1977. There have been, of course, speculative press reports. Let us hope that these reports will not be borne out by events. Any further increase in oil prices will adversely affect the economic development of many non-oil producing countries like Singapore.

In itself, a 5% increase is not substantial. But since more than 60% of our crude oil imports comes from Saudi Arabia, this will represent a further aggravation of the already high oil burden for Singapore. Posted prices for crude oil have gone up by 330% from US$3.01 per barrel in October 1973 to US$13.00 per barrel at present.

The direct effect of an oil price increase would be greatest on the domestic oil bill. There would be an increase in the cost of such oil, with a substantial proportion of it having to be paid by our industries. Besides this domestic impact, the effect of a further oil price increase on the economies of the other countries, especially the advanced industrial countries, has to be considered. The economies of such countries are recovering, albeit slowly. Any adverse effects from an oil price increase on their economies would affect Singapore's exports to these countries, thereby affecting our economic growth.

Given that we are fully dependent on external sources for oil like many other non-oil producing countries, it is our hope that the reports on Saudi Arabia's proposal will not materialise. If the effect of any price increase is to be at all ameliorated, there must be a conscious effort by Singaporeans to conserve energy, thereby reducing our need for oil imports.

2.53 p.m.