SINGAPORE: When conflict erupted in the Middle East, global crude oil markets were rattled, and pump prices followed. Petrol spiked first, with motorists feeling the pinch within days.
But the dynamic has since shifted: diesel has overtaken petrol in price, and analysts say the gap is unlikely to close anytime soon.
A week before the war broke out in late February, major pump stations in Singapore were charging up to S$2.66 per litre of diesel – cheaper than the S$2.88 for 95-octane petrol.
That has since reversed. As of Tuesday (Mar 31), Shell was the most expensive at S$4.23 per litre for diesel, followed by Caltex and Esso at S$4.13, according to price comparison app Price Kaki. SPC and Sinopec charged S$3.92 and S$3.93 respectively.
By comparison, 95-octane petrol is now the cheaper option, at S$3.40 to S$3.42 per litre.
What is driving this shift, and how long will it last? CNA finds out.
Why is diesel outpacing petrol in price?
Diesel is structurally more vulnerable to supply shocks than petrol, analysts say.
It relies on medium or heavy sour crude, which is the type most at risk from Middle East disruptions, and is heavily exposed to global shipping chokepoints such as the Strait of Hormuz, said Mr Nithin Prakash, a commodity analyst at Rystad Energy.
Supply has been further squeezed by Ukrainian strikes on Russian refineries, China’s export restrictions limiting Asian diesel flows, and limited refinery flexibility to boost diesel output.
Demand, meanwhile, has not let up. Diesel powers the industrial, transport, logistics and aviation sectors – consumers who cannot simply cut back when prices rise.
A motorist facing high petrol prices can switch to public transport. A logistics operator has no such option, said Dr David Broadstock, a partner at energy consultancy The Lantau Group.
“Whether it’s delivering goods or people, if the price of diesel goes up, they still need to do their work. They won’t change the amount of diesel that they consume unless everybody in the economy stops moving around,” the economist said.
Petrol prices, by contrast, are cushioned by higher inventories and more flexible supply, added Mr Nithin.