Indonesia's plan to cut fuel imports from Singapore could disrupt trade flows, but fallout likely minimal: Analysts

CNA

13-05-2025

SINGAPORE: Indonesia's plan to cut fuel imports from Singapore could pressure trade flows amid tariff talks with the United States, but observers said they believe the broader impact on Singapore's economy will be limited.
Analysts told CNA that diversification of the economy into areas such as technology and manufacturing will continue to prop up growth.
However, they cautioned that there may be indirect impact on the transport and storage services and wholesale trade sectors.
This comes as Indonesia is looking to change the source of some of its fuel imports from Singapore to the US.
It is currently negotiating the 32 per cent tariffs that the US wants to impose on Indonesian goods. These tariffs have been paused until July.
ADDRESSING TRUMP TARIFFS
Singapore is a major global refining hub and supplier of fuel. In the first four months of 2025, it exported more than 54,000 barrels of gasoil and 8,300 barrels of jet fuel daily to Indonesia.
Indonesian Energy and Mineral Resources Minister Bahlil Lahadalia said last Friday (May 9) that it could shift as much as 60 per cent of its total fuel imports from Singapore to the US in the early stages.
Jakarta is looking to ramp up fuel imports from the US, as part of a wider proposal to address US President Donald Trump's punitive tariffs.
Despite this, experts believe the impact on Singapore's economy would be minimal.
"Even if Indonesia were to scale back their imports, Singapore is resourceful,' said John Driscoll, director of energy market intelligence provider JTD Energy Services.
'They've got an infrastructure, refineries, storage terminals, support services, and besides that, they are the major pricing point east of Suez,' he added, referring to areas located east of the Suez Canal.
'You've got all of the major technology companies setting up the offices out here - Facebook, Google, Amazon. Singapore is not as dependent on oil, and I think that's been a deliberate strategy on their part. They want to diversify away from a reliance on oil.'
EXCESS OIL SUPPLY
The oil industry makes up around 5 per cent of Singapore's overall gross domestic product (GDP). This is smaller compared to other sectors such as manufacturing, which contributes about 20 per cent of the economy.
However, analysts warned that if other countries follow in Indonesia's footsteps, the impact could be multiplied.
"There could be second-round effects on the transport and storage services sectors, the wholesale and retail trade sectors could also be affected, because the activity drops. That could also limit the port activities,' said Mr Jeff Ng, head of Asia macro strategy at SMBC.
'When you have less demand, the manufacturing sector and the services sector may also be impacted.'
Other potential short-term challenges include excess oil supply that could push prices down, said experts.
Even then, they said the market is likely to stabilise over time.
'Singapore most likely will be stuck with a little more oil because there is no buyer of it,' said economics professor Sumit Agarwal of the NUS Business School.
'That should provide downward pressure on Singapore oil that they are selling to, say Malaysia and other countries. So profitability will go down for the refining business for Singapore.
'But in the medium term, Singapore will find other buyers who could be suitable buyers for Singapore's refined oil, and things will be fine.'
Potential players in Singapore's market could include countries from the Middle East, said observers. There may also be interest from investors like hedge funds and banks.