Why petrol stations are making fair, and not record, profits
WE REFER to the letter ("Come clean on pump prices: Case", Oct 21) by Mr Seah Seng Choon, executive director, Case, and his reference to earlier Forum letters.
We have in the past shared the factors that impact pump prices and, to the extent possible, our cost structure with the media and with Case.
We take this opportunity again to clarify the points raised in letters to the Forum.
We clarify again that pump prices do not rise or fall at the same time as crude prices and by the same percentages for the simple reason that pump prices are affected by a combination of factors, and crude prices are just one of these many factors.
Commodity (oil or cocoa) and product (petrol, jet fuel, chemical feedstock, chocolate candy and chocolate beverages) prices, while linked, also have different supply and demand dynamics.
In Singapore, taxes and duties make up about 30 per cent of pump prices.
Another key component accounting for 50 per cent of prices is the cost of petrol and diesel, known as wholesale fuel prices, which are determined internationally and are the result of the actions of thousands of buyers and sellers operating in a global marketplace.
The remaining 20 per cent covers not only operating and marketing costs (discounts, promotions), but also the company's capital cost (land cost) and margins.
The perception that retail service stations are making "record profits from consumers" is inaccurate. The oil business is long term by nature. To remain in the retail business, we need to make a fair return on our long-term investments.
Mr Han Chee Fong stated in his letter ("Petrol prices: It is time for motorists to let their wallets do the talking and regain some voice in this market", Oct 16) that: "The petrol retail market is an oligopoly and it resembles more tacit collusion where there is no incentive for companies to compete."
We beg to differ.
It is precisely because competition is extremely keen that no company will give the others a price advantage at the retail pumps.
Competition is very keen in Singapore where geography is very small, the petrol station networks significantly overlap and consumers are very price sensitive.
Beyond pricing, we also compete with loyalty programmes by continually upgrading our facilities; and through our alliance with NTUC FairPrice, our Esso stations in Singapore offer more value and convenience to our customers.
We would like to reiterate that we at ExxonMobil support free and fair competition and are strongly against any form of anti-competitive practices.
Loh Chee Seng Retail Sales Manager, Singapore
ExxonMobil Asia Pacific Pte Ltd
