Tuesday, November 4, 2014

Gravity Defying Tariffs

First the good news. City Gas announced on Tuesday (Oct 28) that gas prices will be reduced from November 1 till the end of January next year. The gas tariff will be revised downwards, from 21.06 cents per kilowatt hour (kWh) to 20.83 cents per kWh for the three-month period – a difference of 0.23 cents per kWh. City Gas said the lower tariff was due to a drop in fuel costs compared with the August-October quarter, during which gas prices fell by 0.1 per cent or 0.02 cents.

Gas prices are reviewed by City Gas based on guidelines set by the Energy Market Authority, the gas industry regulator. However, the Energy Market Authority seems to be awfully quiet about the tariff for electricity.

In June of 2014 the Brent Crude Oil Price hit US$115 per barrel and many oil market insiders were predicting higher prices. Other analysts however, called a peak, and their predictions proved to be correct. The market closed at US$80.70 on October 31, 2015, 5:14pm, and Goldman Sachs forecasted that U.S. benchmark crude prices will fall further to US$70 per barrel next year.

Three significant factors clearly visible a year ago pointed to lower prices because of greater supply of oil. The end of the US-led embargo on Iran automatically presaged a glut in oil supply. Secondly, the damage to Libya's oil infrastructure during the overthrow of Gadaffi three years ago has been repaired and now the country is back in business. Fracking in the US is the third element that has increased oil supply.

When oil price was high, transport charges kept ratcheting up - bus fare, train fare, taxi fare, etc - and with it, prices of all manner of goods that need to be shipped in. The bad news is that affected prices, in particular the electricity tariff, won't be adjusted down anywhere near the 20 percent drop in oil price. Transport operator SMRT reported on Friday (Oct 31) its profit after tax and minority interests for the second quarter of the current financial year rose 75.5 per cent year-on-year to $25.3 million. Its operating profit from train operations increased by $6.6 million on the back of higher revenue and lower electricity costs. Dream on, if you expect them to pass the cost savings down to the suffering commuters.

10 comments:

  1. Heads I win, tails you lose. Aren't we sick and tired of this?

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  2. Companies are quick to raise prices whenever oil price move North. However, when oil prices tumbles, everyone is keeping quiet. When in a no choice situation, they lower a bit just to show they care. Phui. These are blood suckers. All they see is more profit. Consumer interest has never been in their minds.

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  3. This is a reason why public transport and utilities should be nationalized.

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    1. agree with u. the problem is, the way things r going these days, there is no certainty that nationalisation would help.

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  4. Interesting! Why lower the gas tariff but not the electricity tariff?
    Is it because the authority makes more from eletricity sales than gas sales?

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  5. These sickos are world champion monopoly players.

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  6. Damn problem with monopolies, and worse, government entrenched monopolies.

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    1. Sickos and big G monopolies are not mutually exclusive.

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    2. We have institutions such as CASE and Anti-competition commission. Totally useless. They go after small fries and dare not take on Big organisations. PIGS kow-tow to them.

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    3. These are called rackets if controlled by gangsters. But we know everything the G does is leegal. Defy gravity? I'm sure they have a lot of parachutes, like those they use to enter the backdoor.

      They have done it again, shoot themselves in the foot I mean. MND has banded AHPETC in the red for arrears in collecting S&C Charges, in effect calling WP too soft-hearted towards it's constituents.....unlike the PAP who send lawyer letters demanding payment. AIM reprised.

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