Published on: 04/06/2017
Part 2 of this 3-part series further expounds on factors that may affect electricity prices in Singapore for the coming year or two, and today, we look at geopolitics.
Trump—Words & Actions (Mostly tweets though)
The man of the moment; you had to know this was coming.
This seems like a far fetch, linking tiny hands and raging fingers to Singapore’s electricity prices, but stay with me. The strike on a Syrian air base in March ultimately failed to push up oil prices, thanks to two reasons. Syria isn’t a major oil producer nor is it lying in the way of shipping routes. (Yes, we’ll be reverting to oil from carrots from henceforth). On a broader-scale, Russia and the US didn’t have a war since both decided it wasn’t worth fighting over a dictator gassing his citizens. The Syrian airstrike will probably simply go down as a footnote in history.
An extended campaign in the Middle East, however, is a different matter altogether. Economically, major conflicts in the Middle East are good for oil prices. Apart from causing a supply disruption, military campaigns also provide a huge boom to oil consumption too. And this, as we all know, will directly impact the electricity prices. With the Syrian situation reaching an impasse, Iran prioritising its economic prosperity over its nuclear programme, and ISIS on its last legs, the threat of a Middle Eastern conflict on the scale of the Gulf & Afghan wars is rather remote.
Fingers crossed then, that Trump’s midnight tweets offend no-one with lasting consequences for the next 3 years (you saw what I did there).
Closer to Home—the Spratlys
The biggest threat of a conflict may be a lot closer to our home: the Spratly Islands located in the middle of the South China Sea (or nowhere, if you prefer). This group of islands whose ownership has been disputed ever since colonial times. We’re talking about a collection of sea rocks here. You can see why the phrase “much ado about nothing” comes to mind. These rocks have been the source of escalating conflict in recent years. This was especially so when oil and gas reserves were discovered under them (ok, maybe not quite nothing) and China’s vastly improved navy started flexing its maritime muscle. Its claimants include China, Malaysia, the Philippines, Vietnam and Taiwan. In other words, Big Brother, our (mostly) friendly neighbours and the brother we had to disown to give Big Brother face. (Though we still use his land to train on, but try not to remind Big Brother of it.)
The South China Sea is a major shipping channel, so any conflict there will be a huge inconvenience to everyone. That includes you, the electricity-consuming Singaporean, who wants no part of these rocks. You simply ask that our Terrexes be granted safe passage. All you want is to buy cheap electricity.
Logically, no one should even deign to think they have a chance of beating Big Brother or even bother escalating any sort of conflict. (In 2012, it was reported that one of the two submarines in Malaysia’s navy had “difficulty submerging”.) But, wars have been fought before for pettier reasons and shakier grounds. Let’s hope nothing dramatic happens out in the South China Sea or we could find our electricity prices heading north too.
If you’re intending on getting a Discount Off-Tariff price plan, do read up on Part 1 of the series, a piece focusing on SP Tariff Prices. In Part 3 we draw the links between oil prices and electricity generation in sunny Singapore. For more information, visit ELECTRIFY.SG.