Change the Way you Present Yourself to the Public

Late last month, Finance Minister Tharman Shanmugaratnam announced during his Budget speech that the duty for premium grade gasoline, or “petrol” as it is referred to here in Singapore, will increase by 20 (Singapore) cents to 64 cents a liter, while that for intermediate-grade petrol will go up by 15 cents to 56 cents per liter.

Pump operators reflected the higher duties within a day. A liter of 98-octane-grade petrol was raised by up to 25 cents per liter, and as much as 18 cents per liter for 95-octane grade petrol.

With oil prices tumbling, those who were hoping that petrol prices will fall were appalled that the government raised taxes, with the result that petrol prices went up literally overnight.

CASE (The Consumers Association of Singapore) has sent letters to the main players here asking each of them to justify the increases, which in some cases, were larger than the size of the tax hikes.

“Prices were increased beyond the tax increment without proper justification,” said CASE’s executive director Seah Seng Choon, adding that the association has received queries from concerned motorists.

(Granted, a day after CASE’s action, Shell reduced the price by two cents. While this is two miserable cents lower, prices are still higher than the Government’s announced duty hike of 15 cents a liter for intermediate grade petrol and 20 cents a liter for premium petrol.)

In any case, I wish Mr Seah good luck. Petrol companies are like robber barons of old – they are as unlikely to budge as airlines. In case you haven’t noticed, oil prices have nosedived, but airlines have yet to remove fuel surcharges.

Airline executives explained that it’s because of hedging and that they are stuck with prices that won’t go away. Airlines are still using oil they purchased months ago and for which they paid substantially more than today’s prices.

Fuel hedging has been a common practice among airlines in recent years because of rising energy prices. Typically, airlines sign contracts to buy fuel at a specific price range to protect themselves from excessive rises in oil prices. But now, as oil has shed many per cent of its value for some months now, airlines that hedged are missing out on the cheaper jet fuel. Many airlines are locked in on fuel hedges, months ahead and so cannot simply reduce prices as soon as oil falls.

Still, since fuel is as much as 50% of an airline’s budget, doesn’t that give us cause for some hope of cost cuts?

Nope, I suspect petrol companies and airlines are run by descendants of the Marquis de Sade and friends of Christian Grey or at least by those who are inspired by them.

As long as demand for air travel – and petrol – is there, airlines and petrol companies have no enticement to bring their fares down.

That says a lot about airlines and petrol companies, and the people who run them, doesn’t it?

And of course it says a lot about the government too.