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straitstimes.asia1.com: Petrol price war again

straitstimes.asia1.com: Petrol price war again

“The price war in Singapore comes at a time when international oil prices are at record levels.”

BP initiates a record 16% discount that is quickly matched by its rivals; the cut comes amid new highs in crude oil prices

AUG 7, 2004

By Christopher Tan

AFTER a six-month lull, Singapore’s petrol price war has re-ignited, with companies yesterday revising a day-old 12 per cent discount to an unprecedented 16 per cent.

The 12 per cent ‘National Day’ offer by Shell, ExxonMobil, Caltex and Singapore Petroleum Co (SPC) – that started on Thursday – was overshadowed by BP’s one-upmanship at noon yesterday, even as the price of crude oil hits record levels.

Within hours, all the players except ExxonMobil reacted. By 5.30pm, Shell was putting up freshly made signs at sites where BP is present.

‘We had to rush to make them, because we never had a 16 per cent discount before,’ said an insider. The biggest cut before this was 15 per cent, at the end of last year.

Caltex followed with cuts ‘at selected sites’, but later in the day offered them at all its 29 kiosks except the one in Woodlands.

SPC, on hearing of the spreading discounts, said it was matching the cut at all its 10 stations. The move came shortly after it offered a 13 per cent discount to OCBC Bank credit cardholders.

The largest operator here, ExxonMobil, held out till nearly 8pm when it jumped on the bandwagon and offered the record discount at all its 77 kiosks.

It is uncertain how long the latest skirmish will last, as only Caltex said its lower price will end on Monday, which was to have been the last day of its 12 per cent cut.

The others are adopting a wait-and-see approach. ‘This is going to be interesting,’ said a Shell insider. ‘It’s a price war. The last man standing will be the one with the lowest operating cost.’

Shell, like Caltex and ExxonMobil, will continue to offer loyalty points for fuel bought at the discounted prices.

The points, which can be exchanged for goods or fuel, are already equivalent to a discount of 3 to 4 per cent, said the companies that have them. Hence a 16 per cent cut could slice off as much as 20 per cent of their margins.

BP’s decision to offer the sharp discount comes amid its exit from the fuel retail market in Singapore.

It is selling its entire chain to SPC, and the US$70 million (S$121 million) transaction is due for completion by year’s end.

Industry players said they were not surprised at how quickly the cuts were replicated. ‘We have people at all our stations who monitor prices of our competitors up to six times a day,’ said one.

While motorists will welcome the cuts, which can save them up to $12 for a 50-litre tank of 98-octane petrol, some remain sceptical.

‘Some of those petrol kiosks offering discount don’t carry 92-grade, which is the cheapest. And very few have 95, but most have 98,’ said Mr B.H. Kow, who drives a Hyundai MPV, adding that it was cheaper to buy 92-octane at a kiosk offering 12 per cent than 98-octane at one offering 16 per cent.

The price war in Singapore comes at a time when international oil prices are at record levels.

With tension running high in major American cities over another possible terrorist attack and high demand associated with the start of summer months, US-traded prices went above US$44 a barrel this week – a 21-year high.

Meanwhile, price of diesel at Shell stations rose by three cents yesterday, to 88.2 cents a litre.

But the company assured that its 73 stations will match ExxonMobil’s islandwide 16 per cent petrol discount.

‘We made a public declaration a year ago that we would not be beaten on price at any location, and we’re sticking to it. You can hold us to that,’ said its spokesman.

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Copyright @ 2004 Singapore Press Holdings. All rights reserved.

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