Back in the old days not too long ago, people were commenting how the liberalization of diesel-vehicles would be a good alternative to petrol-powered cars given that diesel engines are way more advanced than yesteryears and that it is not as pollutive as it used to be. Lobbyers were possibly eyeing on the fact that diesel costs much lesser than petrol back then – by as much as 60 cents per litre; and one of the legislative issues holding back ownership of diesel-powered cars was the high tax that is imposed on these vehicles. In fact, it was reported that the Singapore government should look into relaxing the rules and

SINGAPORE is an acknowledged leader in transport management – but its policy on diesel-fuelled cars is increasingly looking antiquated.

While the Republic’s Certificate-of-Entitlement (COE) quota system to control vehicle growth and its Electronic Road Pricing (ERP) system to manage vehicle usage have set the pace for other cities, Singapore is lagging behind in its policies towards diesel-powered cars.

Singapore’s rules for diesel engines were set many years ago when diesel was a dirty fuel. The modern diesel engine and fuel is actually very clean, even compared to gasoline engines.

Current policies, however, do not take that into account. While most commercial vehicles are diesel-powered, few private passenger cars are, with owners discouraged by high charges.

Private users of diesel-driven cars must pay a diesel tax on top of a road tax, which is six times the road tax, or four times for a Euro IV-compliant diesel car. Not surprisingly, only seven out of the 470,000 cars sold here last year run on diesel. This is in sharp contrast to many developed countries, where there is an even greater emphasis on being green. In Britain last week, the government launched a major campaign to promote greener driving, and its underlying message was that a diesel car was the best option as it would travel at least 20 per cent further than a similar car using an equivalent amount of fuel. Almost half the new passenger cars in Europe run on diesel.

It is notable that Japan, which has also frowned on diesel cars, has signalled that it is now prepared to give diesel a second look, given the advancements made in diesel technology. Diesel-powered cars, of course, are not the only alternatives to petrol-driven cars.

Hybrid vehicle technology, which couples the internal combustion engine with an electric motor, will play an increasingly important role as costs come down and as hybrid technology becomes available on a broader range of vehicles.

And the government here has been receptive of hybrids and other vehicles powered by alternative fuels. It offers a Green Vehicle Rebate worth 40 per cent of the Open Market Value (OMV) – or the base value – of a vehicle that can be used to offset the upfront taxes, in order to help motorists who are willing to switch to environmentally friendly vehicles, such as CNG, electric and petrol-electric hybrid cars.

But it can be argued that diesel-fuelled cars, because they are far more advanced in development compared to hybrids or other alternative fuel-driven vehicles, offer the best immediate alternative to petrol-driven cars. Indeed, major manufacturers like BMW, Mercedes and Audi have taken the diesel engine to petrol-beating heights. New-generation diesel engines are not only as clean as petrol engines but also more efficient.

Singapore – which prides itself in having a flexible policy-making regime that keeps pace with changing developments – should consider re-evaluating its stand on diesel.

Source: One Motoring, http://www.asiaone.com/Motoring/Motorworld/Others/Story/A1Story20070813-21739.html

However, diesel price has now crossed the $2 mark, bringing the prices of diesel closer to that of petrol, with it just being 22 cents cheaper than the lowest grade of petrol. This, together with the high tax that comes with private ownership of diesel-powered vehicles, makes diesel-powered vehicles less attractive for private owners. In addition, this will affect taxi drivers as well as bus operators who will be hard-pressed to raise prices again.

This will of course have adverse effects on commuters who depend on such transport, particular school children whose parents have seen at least 2 school bus fee hikes in the past year. In the evening news, it was reported that bus operators may look into transporting workers of companies instead – which may be more profitable than transporting school children.

Parents have also hinted at the possibility of taking their kids off school bus transportation during the last fee hike. With the price of diesel crossing the $2 mark, they may well have to brace themselves for it.

Diesel price crosses $2 mark

By Jason Hau

THE cost of diesel breached the $2 mark yesterday after the latest round of pump price increases.

Shell raised the pump price of petrol by five cents and diesel by 10 cents at 4pm.

When contacted last night, none of the other three petrol companies – SPC, Caltex and ExxonMobil – had raised its prices yet.

With the latest adjustments, a litre of 98-octane petrol costs $2.36 before discount. The 95 grade is now $2.286, with 92-octane at $2.253. A litre of Shell’s V-Power premium fuel will set you back by $2.479.

Diesel, which is used by buses, taxis and heavy vehicles, now costs $2.033, the first time it has crossed the $2 mark.

Diesel prices have gone up by 80 cents in the last 12 months, a 40 per cent increase and the most among the five main fuel variants at pump stations here.

This latest round of price hikes is the 14th since July last year. It comes as crude oil prices reached another record high of US$146.69 (S$199.35) per barrel two days ago.

A Shell spokesman explained that crude oil prices are ‘not the only reason for petrol price increases’. Strong demand from China and India, as well as the increase in costs for transport, and political volatility in some oil-producing countries are all factors that may affect pump prices.

The higher diesel prices are likely to affect the transport sector the hardest.

Private bus operators had earlier been reported as saying that they have raised prices by at least 10 per cent in the last few months, largely because of rising diesel prices.

Mr Lionel Lim, owner of Bedok Transport, foresees hard times ahead for the whole private bus industry as a result of the increasing prices.

However, as the bus operators have only recently raised prices, Mr Lim said that it is ‘unlikely that they will increase (prices) again’.

Motorists here are also switching to cheaper alternatives. Some have given up their cars and moved to public transport. Others have downgraded to smaller cars or two-wheelers.

A growing number have opted for hybrid- engine cars or retrofitted their cars to run on compressed natural gas.

Source: Straits Times Interactive, http://www.straitstimes.com/Singapore/Story/STIStory_254799.html

Some may think that CNG may be a good alternative, but there are other issues to consider before mounting that gas tank in your boot – including the space required, as well as the breaking even with the cost of installing a CNG tank into the vehicle. Attempts to extract more information from the CNG website at http://www.cng.com.sg returned an "Internet Explorer cannot display the webpage" error. However, it is understood that the conversion to a CNG tank costs approximately S$3.5k and there is also a bi-fuel (CNG + petrol) option available. More information of this is available at http://www.scantruck.com.sg/cng.htm.

However, it took an ST Forum writer to figure out that the price of CNG had been going out. Quoting his letter to the ST Forum:

… I am surprised that the price of compressed natural gas (CNG) has also risen. Before May 1, the price of CNG at Mandai CNG station was $1.18 per kilo, after which it went up to $1.38. Less than two months later, Smart, which runs the Mandai station, has again raised its prices to $1.49. The CNG station ran by SPC at Jalan Buroh fared slightly better, with its prices rising to $1.38 only on June 15.

In addition, the writer, David Tan, asks if the government is doing anything to control the price hikes, stating that the price of CNG goes up every time there is a petrol price hike. To this, Paul Lim, GM of Sembcorp Gas replied that:

… the market price of CNG is pegged to the price of high sulphur fuel oil (HSFO), which is a derivative of oil. Over the last six months, the price of HSFO has increased by around 35 per cent, resulting in a corresponding increase in the cost price of CNG. Our company has absorbed the bulk of this increase at our retail outlets at SPC Jalan Buroh and on Jurong Island, and even today, the increase in our pump price of CNG remains significantly lower than the 35 per cent increase.

Moreover, Paul Lim stated that "even with the adjusted prices, in terms of energy equivalence, Gplus CNG is still roughly 45 per cent cheaper than diesel and almost 60 per cent cheaper than 95-octane petrol". It is also interesting to note, in the statement above, that the company has absorbed the bulk of the 35% increase of HSFO at our retail outlets. I can’t help but wonder what is the margin that petrol companies and Sembcorp Gas works on, that allows the latter to absorbed the bulk of, mind you, a 35% increase.

Nonetheless, with prices going up across the board, and not sparing CNG, commuters may be forced to rely more on public transport – which is also not spared from the fare hikes but usually distributes the increase across a wider ridership. While the 3 to 5 cents per trip may not mean much to most of us, this works out to be about 12 to 20 cents on a 4-trip day, amounting to about $6 per month. I won’t do the math, but for the poorer families or those with more kids, this may work out to a hefty sum when combined with other hikes of products or services that’s affected by petrol prices (practically everything).

The implications are overwhelming but as a consumer, I can only brace myself and hope that any "bonus" from the government is good enough to cushion the impact. Getting your vote will also help cushion the impact. =)

ST Forum letter from David Tan:

Why has price of CNG gone up?

IN RECENT months, there was constant news on rising petrol prices, the reason given being escalating oil prices all over the world.

However, I am surprised that the price of compressed natural gas (CNG) has also risen. Before May 1, the price of CNG at Mandai CNG station was $1.18 per kilo, after which it went up to $1.38. Less than two months later, Smart, which runs the Mandai station, has again raised its prices to $1.49. The CNG station ran by SPC at Jalan Buroh fared slightly better, with its prices rising to $1.38 only on June 15.

Rising petrol and diesel prices are blamed on rising oil prices around the world, but what is the reason for the recent increase in CNG prices? Are Smart and SPC out to earn more profit now that CNG cars are fast increasing in numbers?

Is the Government doing anything to control such price hikes? On the one hand, the government encourages Singaporeans to use CNG cars by offering rebates, but on the other, CNG stations increase their prices whenever petrol prices go up.

Perhaps Smart and SPC can clarify their reasons for the increases as I do not recall any news about escalating CNG prices around the world.

David Tan

Source: Straits Times Interactive, http://www.straitstimes.com/ST%2BForum/Story/STIStory_252535.html

ST Forum reply from Paul Lim:

Price of CNG pegged to that of oil derivative

AS THE operator of the Gplus CNG pump at SPC Jalan Buroh station, Sembcorp would like to thank Mr David Tan for his feedback last Saturdy on the price increase of compressed natural gas (CNG) (‘Why has price of CNG gone up?’).

CNG is a relatively new fuel for Singapore drivers and the proportion of CNG drivers remains small. As Singapore’s first retailer of CNG, we would like more Singaporeans to consider switching to this economical and environmentally friendlier fuel.

In view of this, we have worked to keep the price of Gplus CNG affordable. However, the market price of CNG is pegged to the price of high sulphur fuel oil (HSFO), which is a derivative of oil. Over the last six months, the price of HSFO has increased by around 35 per cent, resulting in a corresponding increase in the cost price of CNG. Our company has absorbed the bulk of this increase at our retail outlets at SPC Jalan Buroh and on Jurong Island, and even today, the increase in our pump price of CNG remains significantly lower than the 35 per cent increase.

Nonetheless, readers may be interested to know that, even with the adjusted prices, in terms of energy equivalence, Gplus CNG is still roughly 45 per cent cheaper than diesel and almost 60 per cent cheaper than 95-octane petrol.

Hence it represents an economical alternative fuel for Singapore drivers.

Paul Lim
General Manager
Sembcorp Gas

Source: Straits Times Interactive, http://www.straitstimes.com/ST+Forum/Story/STIStory_253693.html

Article extracted on 5th July 2008



Reader's Comments

  1. Vandalin | July 6th, 2008 at 1:08 pm

    funny thing is, that production capacity, amounts and costs hardly went up significantly over the last few months, even though the price of crude oil hardly rose.

  2. Vandalin | July 6th, 2008 at 1:45 pm

    oops even though the price of crude oil shot up like mad

  3. Onlooker | July 6th, 2008 at 8:05 pm

    Where have all the oil gone to?
    If it is trade in other currencies the problem will disappear.

  4. Barakuda | July 14th, 2008 at 11:32 am

    CNG is now at $1.73 at Mandai. Perhaps we should have a price watch on this blog to monitor the price of CNG at Mandai and Jalan Buroh, so consumers will be able to know which offers the best deal….i.e., market rate. The last I pumped at Jalan Buroh on Sat was $1.51.

    While SembCorp can say it is pegged to oil derivatives, it makes one wonder why should there be a tandem move in price. Furthermore,last week we saw a 4cts drop in retail pump prices. Why no reduction in CNG prices?

    From the CNG website, it is good to know that production cost of CNG is really low…no cracking, distilling etc as the gas is natural and only requires filtering, unlike crude oil and LPG which needs to be processed. With vast reserves that is estimated to outlast current crude oil well into the next century, it is baffling to see the price of CNG at such a high level. If there’s anything to peg the price of CNG to, perhaps we can consider the retail pump prices in the market. Keep it to 40% of retail petrol prices. It makes more sense. Perhaps LTA or MTI should look into regulating this.

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