Prepare for Even Higher Petrol Price As US & Europe Decide on a Russian Oil Import Ban

With the Russia-Ukraine war, it’s no surprise that the cost of many products has risen sharply in the past few weeks.

And oil prices aren’t spared either.

Today (7 March), oil prices increased by more than 6%, the most they have increased since the 2008 global financial meltdown.

This is largely due to how the United States and several European countries are considering boycotting Russian oil brands.

Fuel Prices in Singapore

If you’re familiar with petrol in Singapore, you’ll know that the most popular petrol in the country is 95-octane fuel.

And the price of that has just surpassed the $3 mark, with Shell announcing that the price of 95-octane fuel has been raised to $3.06 per litre today (7 March).

This marks an eight-cent increase from its previous price. 95-octane has increased by $0.28 over the past few weeks.

Other brands have also priced 95-octane at similar prices. Caltex has it priced at $2.98, Esso and Sinopec at $2.95, and SPC at $2.81. Observers also predict that these brands will increase the price of 95-octane to above $3 by the end of March.

Another type of fuel that can be used by most cars in Singapore, 92-octane fuel, is currently the only type of petrol that costs less than $3 per litre. Out of the brands that carry 92-octane fuel, a litre of it costs $2.78 at SPC. The prices at Esso and Caltex are slightly higher, with it being priced at $2.91 and $2.92 respectively.

Along with discounts, SPC and Sinopec are the brands that sell fuel at the cheapest prices.

Drivers in Singapore, take note.

With a DBS Esso card, a litre 95-octane fuel goes for $2.31 at Sinopec, $2.39 at SPC and $2.42 at Esso. If you have an OCBC 365 card, you’ll be able to purchase a litre of 95-octane fuel for $2.44 at Caltex.

Shell has the most expensive fuel by far; a litre of 95-octane fuel will cost you anywhere from $2.63 to $2.75.

As for 92-octane petrol, you can get it at $2.36 per litre at SPC with several cards. At Esso, the DBS Esso card will entitle you to a price of $2.39 per litre. If you have an OCBC 365 card, you’ll be able to enjoy it at $2.39 per litre as well at Caltex.

Of course, if you’re looking for something more atas, premium grade fuel costs more than $3.50 per litre. At Shell, the cost per litre is currently $3.77.

That’s almost $4 just for a litre of fuel.

Diesel Prices in Singapore

On the other hand, diesel prices have gone up as well. Over the last three weeks, diesel prices have increased by over 30 cents per litre.

Currently, Shell has the most expensive diesel, at $2.67 a litre. Esso and Sinopec have the cheapest at $2.55 a litre.

Even after discounts, Shell still has the highest price when it comes to diesel. A UOB One card will allow you to get a litre of diesel at $2.40. On the flip side, SPC charges $1.90 per litre of diesel after discounts.

The prices that kiosks that operate for taxi drivers under taxi operators have also increased greatly over the past weeks. For ComfortDelGro, Singapore’s largest taxi company, diesel prices increased from $1.12 in January to $1.43 now, while 95-octane fuel increased from $1.74 in January to $2.04 now as well.

Oil Prices Around The World

Even though the world has been trying to stabilise oil prices, these efforts are mostly in vain as we see the price of oil increase at an exponential rate across the entire world.

By 0128 GMT (9:28am Singapore time) today, Brent crude futures rose to to US$126.57 (approximately S$172.58) per barrel, seeing a 7.2%, or US$8.46 (approximately S$11.54) increase.

During the same time, the price of US West Texas Intermediate (WTI) crude increased by US$7.65 (approximately S$10.43), or 6.6%, to US$123.33 (approximately S$168.16).

Within the first few minutes of trade, the price of both fuels increased by more than US$10 (approximately S$13.64) to their highest price since July 2008. Brent was priced at US$139.13 (approximately S$189.71) and WTI at $130.50 (S$177.94).

In July 2008, Brent hit a record-high amount of US$147.50 (S$201.12) a barrel, while WTI also reached a all-time high level of US$147.27 (approximately S$200.81) per barrel.

As a whole, fuel prices have reached exceeded the 2008 records. US gasoline has increased to be US$3.890 (approximately S$5.30) per gallon and heating oil futures are currently at $4.2373 (approximately S$5.78) per gallon.

Boycott of Russian Oil

As mentioned earlier, according to Blinken, the US and several European allies are currently considering boycotting Russian oil by banning imports of it. The White House has been coordinating with key Congressional committees in terms of proceeding, with their own ban.

However, to no one’s surprise, this will only further increase the price of oil as the supply of oil gets even tighter.

Russia, as the largest exporter of crude and oil products combined in the world, currently exports around seven million barrels per day.

To put it into perspective, Russia is responsible for providing around 7% of the global supply when it comes to crude and oil products.

CMC Markets analysts explained, “A boycott would put enormous pressure on oil and gas supply that has already felt the impact of increasing demand. Prices are likely to rise in the short term, with a move toward US$150 a barrel not out of the question.

“Such a move will put further pressure on global economies, pushing inflation higher, leaving central banks debating how quickly rate hikes should be implemented.”

Currently, oil prices have increased by around 65% globally since the start of this year, which has prompted countries to take the possible issues regarding world economic growth and stagflation into consideration.

At Bank of America, analysts have predicted a shortfall of five million barrels or even more, should most Russia’s oil exports be cut off. This could result in prices of oil doubling from US$100 to US$200 per barrel.

Analysts at JP Morgan have also echoed similar sentiments, saying that the cost of oil may rise sharply to US$185 (approximately $252.28) per barrel in the near future.

However, US energy firms still decided to go ahead an decrease the number of operating oil rigs last week. This was despite the concerns regarding supply and large surge in oil prices.

El Feel and Sharara oilfields in Libya were two of the oil rigs that shut down. According to the National Oil Corporation (NOC), this caused a loss of 330,000 barrels per day, equivalent to more than 25% of its output last year.

International Energy Agency’s Actions

FYI, the International Energy Agency (IEA) is a Paris-based autonomous intergovernmental organisation. Member states of the IEA hold emergency stockpiles of 1.5 billion barrels of oil.

For what, you may ask.

For times like this.

Earlier this month on 1 March, member states of the IEA came together and decided that the agency will be releasing 60 million barrels of oil from their emergency reserves.

The IEA has decided to do so “to send a unified and strong message to global oil markets that there will be no shortfall in supplies as a result of Russia’s invasion of Ukraine”.

This will allow a two-million increase in the number of barrels of oil a day for 30 days, which is an increase of approximately 2%.

According to the IEA, which was formed in 1974, this marks the fourth coordinated drawdown of oil.

Revival of 2015 Iran Nuclear Deal

Additionally, another factor that may affect the supply and hence price of oil is the delay regarding the revival of the 2015 Iran nuclear deal.

Based on reports from yesterday (6 March), Russia has demanded US for a guarantee that sanctions it faces over the Ukraine conflict “will not hurt its trade with Tehran”. Apart from that, China has also allegedly raised new demands.

US Secretary of State Antony Blinken then responded that the sanctions that the US will impose on Russia due to its invasion of Ukraine have “nothing to do with a potential nuclear deal with Iran”.

Amrita Sen, the co-founder of Energy Aspects, a think tank, also mentioned, “Iran was the only real bearish factor hanging over the market but if now the Iranian deal gets delayed, we could get to tank bottoms a lot quicker especially if Russian barrels remain off the market for long.”

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Eurasia Group, a political risk consultancy, also put out the prediction that Russia’s new demands could affect the nuclear deal. However, they still said that the possibility of a deal happening still stands at 70%.

“Russia may intend to use Iran as a route to bypass Western sanctions. A written guarantee allowing Russia to do so is probably well beyond the realm of what Washington can offer in the midst of a full-scale war in Ukraine,” Henry Rome from Eurasia explained.

Additionally, analysts have also said that even if Iran reaches a nuclear deal, it will take the country “several months” to restore oil flows.

In other news, the discussion between US and Venezuelan officials regarding easing oil sanctions on Venezuela has apparently yet to yield much growth after the first high-level bilateral talks between both countries in years. This comes as the US tries to isolate Venezuela, a key ally of Russia, from Russia itself.

So what should you know after reading over 1,600 words?

Be prepared for higher petrol prices.

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