Saturday, May 16, 2009

Shell to shut tap on budget fuel

Shell to shut tap on budget fuel
Sun, May 17, 2009
The Straits Times

By Christopher Tan, Senior Correspondent

WEEKS after cutting back on the number of stations dispensing 92-octane petrol, Shell announced that it is turning off the supply of its budget grade fuel altogether.

Shell, Singapore's largest fuel retailer, said yesterday it decided to do so because of consistently low demand, claiming 92-octane sales made up only about 5 per cent of sales at its network of 65 stations.

It said even when pump prices hit record levels in mid-2008, its 92-octane sales inched up to only 6 per cent.

The decision has already riled some drivers.

Sales trainer William Lyou, 60, who uses 92-octane for his Mercedes 230E, said: "Simple. If they don't want my business, I'll just switch brands."

Retirees Leslie Ho and Chan Kum Yong echoed the sentiment.

Mr Ho, 66, who drives a Honda Civic, said: "Shell couldn't care less about people like us who are economy-minded. We'll just go to other stations."

Mr Chan, 76, added: "It doesn't concern me because I don't use Shell. My Toyota Vios requires only 90 or 91."

Omitting the grade from Shell's pumps has also prompted the Consumers Association of Singapore (Case) to voice its concern.

Its executive director Seah Seng Choon said: "We are concerned that the cartelistic market may result in 92-octane petrol being totally wiped out of the market in the long run, leaving consumers with less choices."

But Shell retail general manager Henry Chu defended the move by citing a study by international automotive engineering institute SAE.

The study, published in 2006, noted that using a higher octane fuel can improve fuel economy by up to 4.3 per cent.

The study, Shell said, compared 95, 93 and 91-octane fuels, and was done largely with European vehicles.

Shell's fuel technology manager (Asia Pacific) Eric Holthusen added that drivers can expect a 2 per cent improvement in economy if they switch from 92 to 95 - if the car owner's manual recommends 95 in the first place.

"Two per cent is the average," he said.

"We can't guarantee every car gets it. It varies from car to car, and it depends on the technology of the car."

In Singapore, 92-octane is priced at $1.597 a litre before discount - 1.8 per cent cheaper than 95, the next grade.

The gap was wider before.

In 2001 and earlier, it was around 2.6 per cent.

Shell started reducing the number of nozzles dispensing 92 about seven years ago.

It then stopped offering the grade at some stations.

Five weeks ago, only 26 of its outlets had 92 on tap.

It is down to 19

By end-June, it will be withdrawn completely.

Elaborating on the move, Mr Chu said the tank storage space previously used for 92 will now be devoted to other more saleable grades.

Among Shell petrols, he said 95-octane was the most popular, followed by 98 and V-Power.

Shell spokesman Mavis Kuek reasoned that motorists who want 92 can still buy it from other petrol companies.

All the others - ExxonMobil, Caltex and Singapore Petroleum Co - still sell 92.

ExxonMobil said it has about the same number of dispensers for each grade, and that it was a worldwide policy to give its customers choice.

Caltex, which re-introduced 92 in March after a nine-year absence, said sales of the budget grade have been "very good" but would not give figures.

Ms Kuek added Shell removed 92-octane from its stations in Hong Kong in 1991 and Germany last year and was considering pulling the grade in Malaysia also.

According to industry data, 95-octane makes up the bulk of petrol sales in Europe.

But in other big markets like the United States and Japan, the cheapest grade is still No. 1.

Consumer groups say most cars do not require higher octane fuels.

In a recent report, American Consumer News said: "You will not recoup the cost of the higher petrol by increased fuel economy and less automobile maintenance."

ExxonMobil remains committed to lower-grade fuels.

Its retail manager Loh Chee Seng said octane value has "very minimal effect on vehicle mileage".

Mr Philip Chee, product engineering manager at American oil company Chevron, which makes the Caltex brand of fuels, said a car designed to run on 92 will not gain from higher octane fuels.

He notes that 95-octane petrol has a slightly higher energy content than 92, but the difference is no more than 3 per cent.

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