Singapore Petrol Prices Hit New Highs Amid Iran Conflict

Singapore drivers are facing higher pump prices than at any point during the 2022 energy shock triggered by Russia’s invasion of Ukraine. The escalating conflict in Iran, disrupting critical oil supply routes, is the primary driver, with Caltex raising 95-octane petrol prices to $3.45 per litre on March 13th – surpassing the previous high of $3.42 set in June 2022, according to data from the Consumers Association of Singapore’s Price Kaki tracker.

The Middle East Conflict’s Impact on Fuel Costs

The surge in petrol prices reflects a broader pattern of volatility in global energy markets. The current situation stems from the US and Israel launching strikes on Iran ten days ago, resulting in the death of Iran’s supreme leader, Ayatollah Ali Khamenei. Iran has retaliated with strikes targeting Israel and US military assets across the Middle East, including Kuwait, Bahrain, Qatar, Saudi Arabia, and the United Arab Emirates. This escalation has effectively constricted a vital waterway for oil supplies.

The most popular grade of petrol, 95-octane, is now 57 cents, or nearly 20%, more expensive at Caltex compared to February 28th, the day the US and Israel initiated their attack on Iran. For a vehicle with a 50-litre tank, this translates to an additional $28.50 per fill-up, before any potential discounts are applied. Other petrol stations are likewise reflecting the increased costs; Shell and Esso currently price 95-octane at $3.40 per litre, while SPC offers the lowest posted price at $3.30 per litre.

Beyond 95-Octane: Broader Price Increases

The price increases aren’t limited to 95-octane petrol. Posted prices for 92-octane petrol, 98-octane petrol, and premium 98-octane petrol have all exceeded their previous highs recorded during the Ukraine war. Diesel prices are also climbing, exceeding the peak of $3.19 per litre seen in March 2022, when the invasion of Ukraine intensified. This impacts not just individual car owners, but also businesses reliant on diesel for transportation and logistics.

Singapore’s Reliance on Middle Eastern Oil

Singapore is entirely dependent on imported crude oil, with the vast majority sourced from the Middle East. The Strait of Hormuz, a narrow waterway, is crucial for transporting oil and gas from the Middle East to both Europe and Asia, typically handling around a fifth of the world’s oil supply. The ongoing conflict has effectively closed this critical passage, creating significant supply chain disruptions and driving up prices. While the exact extent of the impact on Singapore’s crude oil supply remains unclear, the disruption is undeniably contributing to the rising costs at the pump.

How Petrol Prices are Determined in Singapore

Singapore’s petrol prices are adjusted daily by retailers, who consider the Mean of Platts Singapore (MOPS) average of daily price assessments published by S&P Global Platts. These assessments, however, are not publicly available. Analysts note that these assessments have been volatile and trending upwards throughout the week of March 2nd. Crude oil prices, which have been increasing since the start of the Iran conflict, also play a significant role in determining pump prices. Caltex states that the cost of crude oil accounts for almost 50% of the retail price of petrol.

Geopolitical Risk and Oil Supply

The current situation highlights the inherent vulnerability of global energy markets to geopolitical instability. As the Foreign Policy Research Institute notes, the war in Iran has diverted global attention from the conflict in Ukraine, but the implications for Ukraine – and for global energy security – are significant. The increased demand for air defense systems from the US, as it protects allies in the Middle East, is drawing resources away from Ukraine, potentially impacting its ability to defend against Russian attacks. This, in turn, could further destabilize the region and exacerbate energy supply concerns.

Ukraine’s Potential Role in Regional Defense

Amidst the escalating tensions, Ukraine is exploring opportunities to leverage its expertise in drone technology to assist Middle Eastern states. Having developed low-cost drones to counter Iranian Shahed drones used by Russia, Ukraine is proposing a defensive technology exchange with Gulf states. In return, Ukraine seeks advanced US defensive systems to bolster its own defense against Russia, as reported by Al Jazeera. This potential swap underscores the interconnectedness of global security challenges and the shifting dynamics of international defense cooperation.

Impact on US Air Defense Capabilities

The conflict in Iran is also impacting the availability of US air defense munitions, potentially jeopardizing future deliveries to Ukraine. As Politico reports, the US is deploying expensive air defense systems like Patriot, THAAD, and AWACS to protect its allies and assets in the Middle East, diverting resources that were previously earmarked for Ukraine. This could leave Ukraine more vulnerable to Russian ballistic missile attacks and hinder its ability to effectively defend its airspace.

Looking Ahead: Monitoring Market Volatility

The situation remains fluid, and petrol prices in Singapore are likely to continue fluctuating in the near term. Drivers should anticipate further price adjustments as global crude prices respond to developments in the Middle East. Monitoring the MOPS assessments (though not publicly available) and geopolitical events will be crucial for understanding future price trends. The duration and intensity of the conflict in Iran will ultimately determine the extent and longevity of the impact on Singapore’s fuel costs.