Friday, 30 May 2008

Fuel for Thought

Exhaust PipeSingapore has no natural energy reserves and relies on imports of petrol and water from Malaysia, and natural gas from Indonesia. Both have notable stories this week.

The price of petrol is subsidised in Malaysia to the tune of S$17b per annum (£6.3b) as an economic perk to the masses. Good for Malaysians but also good for Singaporeans who see a big difference between the pump price on either side of the straits causeway. Today, a litre of 95 octane is S$2.186 (81p); it's about 30% less over in JB and to slow down rampant petrol trafficing, Singapore has a rule that local cars going over to Malaysia must have their tanks at least 3/4s full, otherwise you get fined (S$500) and they do check (by looking at the dashboard gauge so I suppose you could get sneaky if you really wanted).

That doesn't stop everyone filing up before driving back; it's an expected optimisation, like pressing the Door Close buttons in a lift; if you are Singaporean, it's just something you do. Many people pop over during the weekend, buy some cheap goods, go to the supermarket, valet the car, have lunch then drive back, filling up the car at the line of petrol stations just before Malaysian customs.

Now Malaysia has announced a ban on foreign-registered vehicles filling up on fuel within 50km of Malaysia's borders. It's to reduce the costs of the Government subsidy & it comes into force today (Friday). The impact to the local JB economy could be severe; at least the JB business owners think it will be, predicting some of the 300 stations within the ban zone will close:

"Die already lah, really die. Business will be down. There are so many kiosks, some will have to close shop."

With some station's patrons being 90% Singaporeans filling up that seems likely although the dust hasn't settled yet and this knee-jerk blanket ban needs more finesse to be workable.

The other energy story is natural gas piped from Indonesia via Batam. The Singaporeans pay well for the gas, about 3 times what the local Batam businesses do and with local shortages in Batam affecting trade, the locals are sabre rattling. Singapore has more than one source of gas, but it is used for ~80% of the local electricity production, so blackouts would follow any significant and prolonged interruption in gas supply.

Everybody seems to playing down the issue and it doesn't look like it will escalate like the Russian / Ukrainian spat last winter but if some Batam guys decided to get creative with the pipeline, who knows what will happen?