WHEN crude oil prices soared this year, reaching a high of US$147 ($216) per barrel in mid-July, oil companies here were quick to react.

Pump prices also went up, though not as much as crude prices.

At one stage, motorists were paying a painful $2.20 a litre for 95-octane petrol.

Then, crude oil prices tumbled, hitting US$78 recently - a drop of some 46per cent.

But hopeful motorists who had expected pump prices to fall as much as they had gone up were left disappointed.

The price of 95-octane petrol today is about $1.80 - a drop of only 18 per cent.

Why is this so, asked irate motorists here.

Electrician Howard Wee, 39, feels the four big oil firms here - Caltex, Shell, SPC and ExxonMobil - have always been quick to jack up pump prices when crude oil prices soar.

But it appears that they don't react so fast when the prices of crude oil drop.

The oil companies here have always maintained that it is not just the crude oil price that determines how much you pay at the pump. (See report on facing page.)

Not convinced

But this explanation does not satisfy Mr Wee.

He said in Mandarin: 'Oil companies have always been quick to raise pump prices. They always say it's because oil prices have increased.

'But today, oil prices have dropped by a large margin, but I don't see pump prices falling by the same margin or the same rate.'

Of course, prices may not drop by the same rate because they did not go up by the same rate in the first place.

But there are still discrepancies that leave many motorists wondering, like Mr Wee, if they have been taken for a ride by the oil companies.

For example, crude oil prices rose from about US$80 to US$98 last October and November - an increase of roughly 23 per cent. (See chart.)

Petrol prices during the same period increased by about 8 per cent, from $1.80 to $1.96.

Yet when crude oil prices dropped some 22 per cent in August and September this year (from US$119 to US$93), petrol prices didn't drop anything like 8per cent.

During this period, petrol prices dropped by less than 3 per cent, from $2.00 to $1.95.

The Consumers Association of Singapore (Case) said it has received eight complaints from unhappy motorists from July to September this year.

Case executive director Seah Seng Choon said it has since written to the oil companies about this.

But the feedback it has received is that apart from crude oil price fluctuations, other factors also affect pump prices.

He said: 'However, we expect oil companies to also play fair and adjust their prices downwards when major cost components head south, although we do understand that the businesses have other costs to account for as well.

'We want the oil companies to run their operations more efficiently to lower their costs, and want them to be more responsive when they adjust prices downwards. This is so that consumers will not be short-changed.'

Transport economist Michael Li of the Nanyang Business School thinks it's a profiteering tactic by the oil companies.

He said: 'It is a delay strategy. When crude oil prices drop, these oil companies will try to delay the price reduction and make more money. It's just common business sense.

'This is until another company drops prices or public pressure forces them to do so because the consumer will expect pump prices to go down.'

He added that when one oil company here increases pump prices, the rest follow, partly to avoid a price war.

'It's in their interests because a price war will only hurt them more. No business can sustain a long period of loss, even if you've greater market share.'

Energy analyst Victor Shum of consultancy Purvin & Gertz Oil consultants added that the intense competition among the few oil companies in a small market here also affects pump prices.

He explained: 'The market practice is that if one company drops prices, the rest will follow. And by the same token, if one company holds back on raising prices, the rest will follow too.

'Competition here prevents pricing to be out of sync with each other. It will not allow any single company to make too much profit.'

Mr Shum said that pump prices do not necessarily move in tandem with crude oil prices.

He explained: 'In pump prices, there are operating costs and also some local taxes. Pump prices have come down, but it'll never fall by the same percentage points as crude oil. It's not necessarily a one-to-one comparison.']

This was first published in The New Paper on Oct 15, 2008.