FIRST, I would like to commend Shell as the only petrol company to display its nett selling price clearly. This is an exemplary practice which must be encouraged and supported by all motorists in the name of consumer interest. While I am all praise for Shell, some friends have complained that the company has reduced the number of pumps available for its 92-Octane petrol. I hope Shell will be mindful of this because there are still a large number of cars which use this grade of petrol.

The main point of this letter is to highlight the sluggishness with which petrol pump prices respond to the sharp and sustained drop in crude oil prices.

In the past five weeks, crude prices have dropped from around US$120 to US$80. In the same period, there was a drop of four cents in pump prices before the latest drop of five cents last week.

This response is pathetic if you compare the drop in crude prices from US$150 to US$80, which is a 50 per cent drop. The drop in pump prices in the corresponding period is nowhere near this.

Everyone (from the heartland to the boardroom) is tightening his belt in the looming recession. Petrol is the common strain that impacts almost all aspects of our lives. Besides commuting (cars, buses), the price of all goods and services is impacted as they need to be transported.

It is time for motorists to let their wallets do the talking and regain some voice in this market. The petrol market has been neutralised by non-price competition dished out by petrol companies (credit card-linked discounts, loyalty points, point-of-sale discount and so on).

Motorists have been lulled into complacency. They do not bother to shop around for a better deal on petrol.

Gone are the days of the tissue-paper gifts war, where motorists formed long queues in front of petrol stations along Bukit Timah Road which offered special prices.

The petrol retail market is an oligopoly. At the moment, it does not look like a non-collusive oligopoly where there is some form of competition between petrol companies. It resembles more tacit collusion where there is no incentive for companies to compete. The first mover to reduce price does not win any temporary market share or goodwill, even in the short run. In fact, it probably loses in the few hours it has to charge less than its competitors.

As motorists, we should be more proactive in supporting the more responsive and responsible company. We should not hesitate to switch companies if we find the need. It is time we took control back in consumers' hands. Our consumer watchdog, Case, must also be extra vigilant in monitoring the situation and point out the facts in an accurate and compelling manner. Petrol is an important commodity which affects not only motorists but also the price of almost all goods and services.

Han Chee Fong

This article was first published in The Straits Times on Oct 16, 2008.

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