Singapore's manufacturing sector, a key pillar of its economy but also highly dependent on energy imports, is starting to feel the effects of the ongoing Middle East conflict, with industries such as oil refining, petrochemicals, and semiconductors all being increasingly affected.
The ongoing conflict, which erupted after joint U.S.-Israeli strikes on Iran that set off a wave of retaliatory strikes across the region -- has tightened global energy supplies, with much attention focusing on the severe disruption the war is causing to shipping through the Strait of Hormuz -- a vital passageway which typically carries around one-quarter of global seaborne oil trade.
As the world's third-largest refining center and a major oil trading hub, Singapore's refining industry relies heavily on crude oil supplies from the Middle East.
Following the outbreak of conflict, there have been significant delays and cancellations in crude deliveries from the Gulf region, causing refinery operating rates in Singapore to drop sharply, with one industry insider noting that many firms have had to slowdown operations. "[A large] portion of it [our industry] very much focuses on refining as well as chemicals which are oil related. This have definitely a quite strong impact. So it is estimated that with the recent hike in oil prices, with energy intensive companies, I think their costs have gone up between 2 to 6 percent. Because of the lack of the base oil, most of the refineries are only operating about 50 to 60 percent capacity, so this has disrupted their supply chain as well as their efficiency," said Lennon Tan, chairman of the Singapore Manufacturing Federation (SMF). The rising fuel prices are also seeing more consumers start to tend towards electric vehicles (EVs) as a more affordable alternative in the long run. Supported by government subsidies and policy incentives, Singapore's electric vehicle sales have continued to climb, and the conflict could accelerate this trend the longer it goes on.
"We see a big uptick in terms of electric vehicles and the authority is still extending the EV subsidies of 22,000 [Singapore dollars] and in the meantime they increase the levy for ICE (internal combustion engine) vehicles. So with the oil prices going up substantially, I think it is a natural decision for consumers to sway towards the EV," said Tan.
Singapore's crucial manufacturing, refinery sector hit by ripple effects of Mideast conflict
