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Thursday July 10, 2008

Singapore petrol prices lowered 4 cents after crude oil drop

This article belongs to the Singapore inflation watch story arc.

channelnewsasia.com :

All four petrol companies in Singapore - Shell, Exxon-Mobil, Caltex and SPC - have lowered their pump prices on 9 Jul 2008 by 4 cents a litre for petrol to reflect current market conditions. Before discounts, RON92 unleaded petrol is now S$2.213 per litre, RON95 is S$2.246 and RON98 is now S$2.32. There is no change in the diesel price, which stands at S$2.033. The petrol companies had last increased pump prices for both petrol and diesel just 4 days ago. NYMEX crude oil had tumbled by US$5.33 to close at US$136.04 on Tuesday after hitting a record high of US$145.85.

- Now, how's that for a roller-coaster ride? Singapore petrol prices went up 5 cents, went up another 5 cents 10 days later, and now they're down 4 cents just 4 days after that. That should help somewhat to dispel the notion that petrol prices are quick to go up when crude oil prices go up but never come down when oil prices go down.

I'm a little surprised this time round, because the lag time is usually 1 to 2 weeks before the petrol prices catch up with the crude oil price movements, as the differently-priced refined product makes its way down the supply chain. What might have been different this time? Did the oil majors bow to public pressure by absorbing some of the costs? That's unlikely, and it would have been quite out of character for them. Did they suddenly shorten the supply chain? That's unlikely also, in such a short time. Perhaps they bought slightly less crude oil as it was hitting the recent records, in anticipation of just such a drop. Maybe a bit of all the above, or maybe none of the above.

What I find notable is the fact that diesel prices are unchanged. The supply situation for diesel seems to remain tight. Actually now that I think about it, the peakoiler community has been discussing another possible reason : since there is a diesel shortage out there, the refineries need to process more crude oil, and the refining process cranks out both petrol and diesel. They can adjust the mix to have slightly more diesel than petrol, but there are physical limits as to how far they can push it. Hence, while they are producing more diesel, they are also producing more petrol. So the supply for petrol/gasoline increases, and prices drop. Just a thought.

Meanwhile, enjoy these (lower) prices while they last. This situation won't last forever. Remember that these prices are still by no means low, as all grades of petrol are still well over $2 per litre. Crude oil is currently consolidating around the $135 level, as it builds up a base for a rebound off support levels. The next target is $150 oil. We're in the proverbial eye of a hurricane, the calm before the storm. Do not let your guard down. This is no time to be going out to buy an SUV, if you know what I mean.

Updated :

1. Singapore petrol prices down another 4 cents on lower crude oil prices
2. Singapore petrol prices drop 4 cents for third time in 2 weeks

(2008-07-10 18:33:06 SGT) [Energy] Permalink

Singapore GDP shrinks 6.6% in Q2 2008 as stagflation continues

This article belongs to the Singapore stagflation watch story arc.

channelnewsasia.com -> app.mti.gov.sg :

Singapore's real gross domestic product (GDP) registered an estimated 1.9% on a year-on-year basis in the second quarter of 2008. Statistics released by the Ministry of Trade and Industry [MTI] on Thursday [10 Jul 2008] showed that the slowdown reflected a sharp contraction in the biomedical manufacturing output. On a quarter-on-quarter seasonally-adjusted basis, real GDP declined 6.6% following an increase of 15.6% in the previous quarter. The manufacturing sector is estimated to have contracted by 5.6% in the second quarter, compared with a 12.7% growth in the first quarter. The electronics cluster also registered some decline due to weakening foreign demand. However, the transport, engineering and chemicals industries continued to grow.

bloomberg.com :

Asian governments are torn between efforts to rein in surging prices and the need to shore up growth. Singapore Finance Minister Tharman Shanmugaratnam yesterday [9 Jul 2008] warned there is a limit to how much the country's dollar can gain to fight inflation, as any "dramatic strengthening" of Asia's third best performing currency this year may hurt exports "badly."

- The economic outlook looks cloudy, with reports that continue to confirm that we are not only heading into, but may already be in a stagflationary environment. I have been watching the economic reports with concern for the past months, waiting for the lag effect of the housing- and credit crisis-led US slowdown and subsequent recession to hit Singapore. I reckoned that it would take half a year to at most a year. And now it looks like we are getting hit hard.

The quarter-on-quarter Singapore GDP reports are looking increasingly gloomy, with the earlier report of a 4.8% GDP shrinkage in Q4 2007, followed by a relatively better subsequent quarter, and now we are back in GDP contraction mode again. The headline year-on-year Singapore GDP growth rate does not look very good either, at only 1.9%. Given that the M3 money supply growth rate has been running at around 12% in the past months, that makes for a real inflation rate, from an Austrian economic basis, of around 10%. Which is somewhat higher than the official CPI figures of 7.5%.

It would be officially stagflation in Singapore if the headline year-on-year GDP growth rate falls into negative territory, and inflation continues at its present rate or even increases. Can the Singapore economy try to eke out a positive reading in the subsequent quarters or will it fall below zero? We shall see about that. Crude oil prices not too far from recent record highs, increased petrol and diesel prices, and electricity rate increases are certainly not helping the situation at all.