SINGAPORE PETROLEUM COMPANY PRIVATE LIMITED (Propping up cartel of oil companies)

Mr Chin Harn Tong asked the Minister for Trade and Industry whether it is a policy of the Government that the Government-owned Singapore Petroleum Company Private Limited should help to prop up the cartel of oil companies operating in Singapore instead of seeking to enlarge its share of the retail market by more aggressive and competitive pricing.

The Minister for Trade and Industry (BG Lee Hsien Loong): Mr Speaker, Sir, when oil prices rise, it is natural to blame a cartel. But there is no evidence that such cartel exists in Singapore now. The recent oil price increases are caused by the reduced supply of crude oil as a result of the Iraqi invasion of Kuwait.

MTI has closely monitored petrol prices since they were deregulated last December. Pump prices have moved in line with posted prices. Posted prices are the wholesale prices at which petrol is traded internationally. Pump prices have gone up when posted prices increased, and gone down when posted prices fell.

Singapore's domestic market for petroleum is small. Oil companies depend on the local market for only a small part of their business, less than ten percent. Their main business is international. The bulk of the oil stocks they hold are destined for overseas customers. Thus, their posted prices reflect world supply and demand for oil. They are not determined by the Singapore market. The local marketing company buys petrol from the refineries at these posted prices, like any other international buyer.

For example, Shell Singapore buys petrol wholesale from Shell Eastern, the refiner, just like Shell Hong Kong does. The only oil stocks which can be con- sidered "domestic" and "belonging to" Singapore are the stocks held in Shell Singapore's petrol tanks on the mainland, and in the underground tanks of petrol stations. These typically last about a week of normal consumption. So, the normal lag between wholesale price changes and retail pump price changes is about a week.

It is not wise for the Government to ask oil refiners to "reserve" some of their old export stocks for the Singapore market, in order to insulate domestic customers from the effects of rising oil prices. When this becomes known, as it must, it will damage Singapore's position as an export refinery centre. The Government should maintain export neutrality, as it did during the oil shocks of 1973 and 1979.

Finally, as for Singapore Petroleum Company Private Limited, the Government does not intervene in the operations of private companies. Government-owned companies receive no special privileges, nor are they expected to act contrary to their commercial interests. In any case, Singapore Petroleum Company Pte Ltd (SPC) is not a wholly Government-owned company. DBS owns 62.6% of SPC, directly or indirectly, and, of course, the Government only owns about half of DBS. The rest of the shares of SPC belong to private investors.

Mr Speaker, Sir, I think I have dealt with both questions from the Member.

Mr Heng Chiang Meng: Mr Speaker, Sir, may I ask the Minister to give this House an assurance that his Ministry will also use the same rationale on pump prices, when posted prices or international prices drop.

BG Lee Hsien Loong: Mr Speaker, Sir, yes, indeed, we have been monitoring the situation, as I have said. Since December last year when we deregulated petrol prices, there have been quite a number of changes in the world oil markets and in the posted prices, and we have been tracking the retail prices. They have moved in step.