The Challenges of the Transport Industry
The transport industry has seen its challenges over the past few years. Starting with the COVID-19 pandemic which threw a hammer in the works, sparking a drastic decrease in tourism and passengers. Following the outbreak, measures such as the circuit breaker and work-from-home arrangements were put in place to contain the spread of the virus. Concurrently, the manufacturing plants were also affected as factories of car parts and semiconductors closed down during the height of the pandemic. For car owners, rising COE prices and inflationary pressures, along with revised Additional Registration Fees in the Budget 2022, has made the car commodity and even more inaccessible one. Car rental companies, being a subset of the transport ecosystem, were not spared.
Spikes in Oil Prices – Russia-Ukraine Conflict
At present, fuel prices at petrol pumps have sky-rocketed in the last few weeks and have reached the highest levels on record due to the Russia-Ukraine geopolitical tension and Singapore has not escaped from its economic consequences. The invasion has been placing pressure on the supply flow of oil as Russia, being one of the world’s top three oil producers after the United States and Saudi Arabia, has had sanctions imposed for its invasion of Ukraine. Moreover, concerns over potential global supply disruption have been driving oil prices into a frenzy. However, assuming the global demand for oil remains constant, this crisis would inevitably lead to a decreased supply. Out of necessity, countries who previously relied on Russia for its oil supply would then have to source from potentially higher-priced supplies from other countries to satisfy current oil consumption, further inflating the price of oil.
Oil Prices Volatility
As retail oil prices change as per market oil prices, petrol costs at our local petrol stations have also seen its volatility, albeit a “lag effect” in pricing changes. In the meantime, other considerations also go into the price volatility (i.e. duties, cost of storage, foreign exchange rates, manpower). All oil prices were selling at above $3 or more per litre during early to mid March, but have come down slightly since. Experts also say that volatility in oil prices is expected among the upcoming weeks, as demand-supply factors affect sway and tilt the pricing see-saw.
Effects on the Transport Sector
The transport sector has taken the brunt of the effects of the oil price spike.
From bus companies to taxi drivers, motorists are feeling the brunt of the rising oil prices, on top of inflationary monetary pressures. Regular car drivers are also sensing the pinch with an incremental but substantial price difference felt over the long term. This is on top of a passenger demand that has yet caught up to its pre-pandemic days. The situation is being monitored closely as companies consider additional support to be provided for taxi operators and ride-hailing providers to help drivers manage fuel costs. On 19 March 2022, Gojek was said to introduce a $0.50 temporary flat fee on short trips (<10km) and $0.80 for long trips (>10km) to help drivers cope with rising petrol prices.
Renting from a Car Rental Company Amidst Oil Spike?
For car rental customers, it may be wise to research for the cheapest prices for petrol in the midst of the oil crisis. Be it long term car rental or short term car rental, the hopefully temporary rising cost of oil may be borne by everyone. While car rental companies can assist with fuss-free one-off payments to offset exorbitant down payments incurred during car ownership purchases, the impact of rising petrol prices is a variable cost that would be more greatly felt by drivers who more frequently use the car, or those who travel greater distances, especially since most car rental companies require customers to top up the rental car to a full tank before the return of the car.
Suggestions: What Can Car Rental Customers Do?
As car rental customers, here’s some options to help circumvent the current oil price spikes while still getting your commuting needs met.
- Firstly, one can look out for Hybrid car options while looking out for a car rental vehicle. Its fuel efficiency and environmentally friendly qualities make them no less suitable for everyday use as compared to their petrol-run counterparts. By combining electric power and petrol/diesel, it helps one save on fuel expenses as the electric engine is activated when the car is cruising.
- Electric vehicles are also on the rise, albeit them being relatively pricier than the petroleum-fuelled cars. Check out: All Systems Go For Electric Vehicles – What Roadblocks Exist For Car Rental Companies?
- Alternatively, if petroleum-fuelled cars are your only option available for car rental, it is suggestable that one can consider Japanese cars instead of Continental cars as they are about 36% more efficient. Here’s a previous article further diving into the differences between Continental and Asian Cars: Differences between Continental and Asian Cars
- Lastly, understanding more the different types of petrol may help one get better understanding on the the type of petrol that best suits the needs of the car, and the differences between each variation of petrol. For further information on petrol, check out: The Cost of Different Types of Petrol for Rental Cars in Singapore and 95-Octane vs 98-Octane – Which is Better?
Concerned about which car is most suitable for you at this point in time? You may contact BizLink Rent-A-Car Pte Ltd. and our sales associates will do our best to respond to any of your queries on your car rental, provide petrol tips and to guide you along your rental journey to ensure a smooth journey throughout your rental period.