Union Gas absorbs rising oil costs to acquire more customers, long queues seen at Cnergy petrol stations: BT

Price-sensitive motorists have been flocking to Cnergy as oil prices have risen past the S$3 per litre mark.

According to the Business Times (BT), the Singapore brand, which is owned by Union Gas Holdings, has kept prices intentionally low, up to S$1 lower than its competitors.

This move has led to traffic jams around its station in the Katong area and a surge of around 40 per cent in its parent company's share price.

Cnergy's management told BT that this was a calculated move to increase their market share.

Absorbing wholesale costs directly

Union Gas said the low pump prices do not rely on hedging strategies; instead, they are absorbing wholesale costs directly, relying on volume sales.

Hedging strategies are used by companies to lock in oil prices months in advance, to protect against market shocks and keep prices down.

On Mar. 20, Union Gas chief executive Teo Hark Piang told BT that they make "a very, very marginal profit" and that there are days when they "go without profits".

Teo said that Cnergy treats the cost difference as "marketing expenditure" and that the company is keeping overheads manageable to pass savings on to customers.

"So long as the business doesn't lose money, we just let it go."

Traffic congestion

Cnergy's pricing strategy has resulted in operational bottlenecks at its three petrol stations, with long queues of cost-conscious drivers eager to fuel up.

The volume of customers has resulted in blocked bus lanes and traffic congestion.

As a result, the company has incurred additional unexpected operational costs.

Teo said: "I know the queue is terrible... we have deployed some of our guys to the site to control the traffic."

Cnergy's pump prices were S$2.48 a litre for 95-octane petrol and S$2.80 for 98-octane petrol for members as of Mar. 23, according to The Straits Times.

This is around 98 cents cheaper than the S$3.46 before-discount price offered by SPC.

Cnergy is also cheaper than the other major gas stations in Singapore.

EV ambitions crowded out

Moreover, Cnergy's electric vehicle (EV) ambitions are dampened by the crowd of cars, reported BT.

Teo said: "EV (drivers) don't want to be in the queue to come and charge".

Teo has also said that he would advise tenants to delay opening planned snack bars at Dunman Road and Queensway stations to prevent queues from building further.

Teo said that Cnergy cannot sustain fixed prices indefinitely and will have to adjust prices based on the purchase price of its next cargo.

Teo added: "If the next shipment is expensive, then we'll move up a little bit."

However, he noted that Cnergy "will try its best to maintain the same distance" in price from its competitors, banking on customer goodwill to outlast the oil shocks.

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Top photo from Benjamin TP Tan/Google Maps and Kai Martin/Google Maps