Diesel price spikes fuel concerns over higher business costs, consumer prices

[SINGAPORE] Diesel prices in Singapore have recently spiked, and industry players warned that higher transportation and logistics expenses could drive up the cost of doing business as well as the prices of goods in Singapore.

Energy and commodity market intelligence provider Argus indicated that Singapore gasoil prices have reversed from the downward trend seen from March to June this year. It climbed to a recent high of US$210 per barrel on Sep 16, up from US$111.75 per barrel on Jun 26.

Gasoil is the global benchmark for diesel and heating oil price.

The Consumers Association of Singapore’s Price Kaki app indicated that, as at Sep 22, the price for a litre of diesel was S$4.07 from major retailers Caltex, Esso and Shell.

While still below the 2026 high of S$4.68 from April to May, it is the first spike after two months of relative stability.

Diesel is derived from crude oil, the supply of which has been constrained by restricted passage through the Strait of Hormuz and the ongoing Russia-Ukraine conflict.

Dieter Billen, partner and head of energy and sustainability for South-east Asia at consulting firm Roland Berger, said: “Singapore is significantly exposed to the spike in diesel prices as an open economy. Price shocks abroad translate into inflation, and it directly increases transport and logistics costs.”

Cara Wong, head of Asia-Pacific middle distillates pricing at Argus Media, noted: “We have seen diesel prices move sharply up through the course of the US-Iran war, amplified further by the situation in Russia because of Ukrainian strikes on Russia’s oil infrastructure.”

Supply tightened once again as Iran-backed militants carried out strikes in Saudi Arabia, forcing the shutdown of the country’s East-West oil pipeline on Sep 11, a major alternative for crude oil flow.

While Saudi Arabia’s East-West pipeline began operations once more on Sep 22, a full restart will take six to eight weeks. Observers do not see diesel prices dropping any time soon.

Knock-on effect

Globally, diesel powers everything from farm equipment to commercial vehicles and marine vessels, so high diesel prices have a knock-on effect throughout Singapore’s economy.

Praveen Gregory, DHL Global Forwarding’s CEO for Singapore, Malaysia and Indonesia, explained: “Fuel is a fundamental input for trade and transportation, so when diesel prices rise sharply, the impact is keenly felt across the entire supply chain.”

He added: “Airlines, shipping lines and transport operators all face higher operating costs... Over time, those costs can flow through to manufacturers, retailers and consumers.”

Associate Professor Chang Youngho, head of Applied Economics Minor at the Singapore University of Social Sciences, said that diesel’s importance means an increase in price has a cascading or spillover effect through supply chains. “Business in general should bear higher input costs for intermediate goods that are produced by diesel as well as higher consumer prices if they are a final consumer for diesel,” he pointed out.

Fresh foods and locally delivered items will be most affected, while retail and manufactured goods could also see price increases, said Roland Berger’s Billen, due to diesel-driven local distribution costs and higher import freight rates.

Import focused businesses, which encompass most in Singapore, will face broad cost pressure from fuel and freight costs, with F&B, retail and delivery/logistics segments feeling this fastest. Meanwhile, export-oriented manufacturers – such as electronics, petrochemicals sectors – face higher input/shipping costs, which will squeeze competitiveness.

Prices may not increase in direct proportion to diesel spikes, though.

Oriano Lizza, sales trader at online trading and forex firm CMC Markets, said: “A 2 to 3 per cent move at the pump is not a 2 to 3 per cent rise in what it costs to put goods on a shelf. Cheaper inventory gets run down first and promotions get trimmed, which is the change shoppers tend not to register – the shelf price holds while the discount disappears.”

Fuelling volatility

Observers said logistics and delivery companies will be affected most by diesel prices, especially smaller outfits and those that focus on road freight.

CMC’s Lizza said that most businesses will absorb fuel price increases in margins, especially where contracts are fixed and competition is tight.

“The least room belongs to fuel-heavy SMEs (small and medium-sized enterprises), where fuel can account for about a third of operating costs. Watch for surcharges on selected jobs, shorter contract terms, routes consolidated to cut mileage, investment decisions put off. All of that comes well before anyone raises prices across the board,” he added.

Roland Berger’s Billen noted: “Road freight is under pressure from diesel costs directly. Last-mile and local delivery costs will climb, hitting e-commerce, F&B delivery, and retail restocking. These segments operate on thin margins and will, to a large extent, pass these cost increases to their customers.”

Despite a pivot to electrification in recent times, the majority of commercial vehicles in Singapore still use internal combustion engines. As at August, 151,614 or 94.4 per cent of all commercial vehicles and buses use internal combustion engines, while 85.7 per cent, or 137,576, are diesel-powered.

Singapore introduced incentives for heavy electric commercial vehicles in 2026, but high demand caused commercial vehicle Certificate of Entitlement premiums to shoot up. In early September, the incentive was slashed to S$15,000 from S$40,000, a move observers said could hinder their adoption.

Thomas Earl, senior director of modelling and data analysis at European NGO T&E, said that it is becoming clearer that diesel volatility will have a lasting impact on the operating costs of businesses, and governments should continue to support take-up of electric vehicles (EVs).

“The longer countries remain reliant on fossil fuels, the longer they are trapped in a cycle of volatility,” he noted.

Christopher Ong, DHL Express’ senior vice-president and managing director for Singapore, said that as at 2025, around 70 per cent of the company’s last mile delivery fleet – roughly 100 vehicles – were EVs, which reduced its reliance on conventional fuels “significantly” and helped cushion the impact of higher fuel prices.

Looking ahead, industry observers do not see any relief from high diesel prices.

At a conference on Sep 11, Chevron chairman and chief executive Mike Wirth said that tools that mitigated crude supply disruptions early in the turmoil are mostly depleted, making price increases far more probable than drops in coming months.

CMC’s Lizza explained that while the pipeline reopening caps the extreme crude risk, “it does nothing” for diesel, which stays tighter than crude.

“The pipeline moves crude to the Red Sea; that is the whole of its job. It does not reopen Hormuz. It does not restore Gulf refinery runs or refill inventories. So Singapore pump prices can stay sticky even with Brent retreating,” he added.