The GRI is Here to Stay: Fuel Banding May Soon Move Back to Tier 2
When we introduced our tiered General Rate Increase (GRI) model in April, we framed it as a response to a new reality: fuel volatility was no longer an exception, but part of the operating environment. Two weeks on, that reality has not changed—and the data suggests the market may be bracing for another upward shift.
Diesel Prices Have Eased, But the Reprieve Is Temporary
We noted in our previous post that diesel prices had eased from their April peaks, settling around S$3.90 to S$4.05 per litre. In early July, several major retailers—Shell, Caltex, Esso, and Sinopec—reduced diesel prices by 10 to 15 cents, bringing posted rates below S$4 per litre for the first time since March.
SPC followed suit on July 7, completing the round of cuts. As of mid-July, diesel prices across Singapore range from S$2.58 at Smart Energy to around S$3.95 at major retailers .
That sounds like good news. But the picture is more complex.
First, the price spread across retailers remains unusually wide—from S$2.58 to S$3.95 per litre. That disparity signals a market still adjusting to volatile wholesale conditions, not a stable, normalized environment.
Second, the factors that drove prices up in the first place have not disappeared.
Brent Surpassed $100, Confirming Upward Pressures
On July 23, Brent crude surpassed $100 per barrel for the first time since May, reaching a two-month high. While prices have since pulled back to around $99–$96 per barrel , the psychological barrier has been broken. The physical crude market tells an even more urgent story: dated Brent—used to price over 60% of the world’s physical crude cargoes—hit $105.70 per barrel on July 24. North Sea Forties crude was priced at $108.77 .
Analysts at ING noted that “the potential supply disruptions facing the market now are larger than at any time during the war”. JPMorgan estimates that each additional month of disruption could add around $7 to $8 per barrel to Brent.
The Red Sea Has Become a New Hotspot
- This is the most significant new development. The Iran-backed Houthis have declared a naval blockade on Saudi Arabia and have followed through with attacks on Saudi oil tankers:
- On July 22–23, the Houthis attacked two Saudi-flagged tankers—the Encelia and Layla—with ballistic missiles, cruise missiles, and drones . Both vessels were set ablaze.
- Saudi authorities confirmed the attacks and issued emergency warnings for the Red Sea port towns of Jizan and Yanbu. Neither Saudi Arabia nor Aramco have officially confirmed the claims, but the warnings were issued regardless.
- The Houthis claim they have forced around 10 vessels to turn back from Saudi ports.
Why this matters: Saudi Arabia had been relying on the Red Sea route as an alternative to the blocked Strait of Hormuz. Since the conflict began, the country has redirected crude exports through pipelines to the Red Sea port of Yanbu, maintaining about three-quarters of pre-war export levels. The Houthi blockade now threatens that alternative, forcing Saudi exports to be rerouted around Africa—adding weeks to sailing times and driving up freight and insurance costs.
Strait of Hormuz Shipping Has Slowed to a Near-Standstill
Shipping traffic through the Strait of Hormuz has fallen sharply. Daily vessel transits have dropped to as few as three per day, according to ship-tracking data from Kpler . The strait is now essentially operating under Iran’s terms, with vessels only moving through a northern corridor approved by Tehran.
Global Warning: "Safety Valves" Are Weakening
Analysts are increasingly concerned that the market’s ability to absorb further shocks is eroding:
- Strategic oil reserves are lower than when the war began, leaving less buffer for prolonged disruptions.
- Spare production capacity has been drawn down during previous periods of conflict.
- Oxford Economics has warned that if both the Red Sea and the Strait of Hormuz were closed, oil prices could rise to over $160 per barrel.
Why the GRI Banding Could Return to Tier II
The GRI model we introduced uses three bands:
- Tier I: S$2.80/L to S$3.99/L
- Tier II: S$4.00/L to S$5.49/L
- Tier III: S$5.50/L to S$6.99/L
Current diesel prices sit at the upper end of Band 1, around S$3.90 to S$3.95. But several indicators suggest a move back into Band 2 may be imminent:
- Global diesel markets are tightening
The Singapore-to-Europe gasoil East-West spread has widened sharply, with European diesel cracks surging 44% due to supply constraints . Falling Rhine water levels, curtailed Middle East imports, and Russian refinery disruptions have cut European diesel exports to under half seasonal norms . When Europe competes more aggressively for diesel cargoes, Asian prices—including Singapore’s—tend to follow.
- Geopolitical risks remain elevated
The Middle East conflict has not de-escalated. Iran’s Revolutionary Guards continue to assert control over the Strait of Hormuz, and the Houthi blockade in the Red Sea persists . While container rates have not spiked dramatically, Hapag-Lloyd estimates the conflict is costing carriers US$40–50 million per week in higher fuel and insurance costs . These costs flow through the supply chain.
- Wholesale price projections point upward
Industry sources in the region project domestic diesel prices could climb by S$2.50 to S$4.50 per litre in the coming week, driven by a squeeze on global middle distillate inventories . This would push retail diesel comfortably past the S$4.00 threshold that marks the boundary between Band 1 and Band 2.
- The broader freight market is repricing
Across the logistics sector, companies are adjusting for sustained cost pressure. Maersk, Hapag-Lloyd, and ONE have all implemented intermodal fuel surcharges for Singapore, ranging from S$50 to S$65 per trip, with warnings that further adjustments may be required. Yamato Transport has similarly implemented war surcharges on container trucking. Aramex’s fuel surcharge for Singapore is currently at 40% for July 2026, up from 47% in June—still elevated.
What This Means for Customers
In our previous post, we made the case that fuel-linked trucking costs should be planned for as part of the operating baseline, not treated as a temporary exception.
That message holds – and it is now more urgent than ever.
If diesel prices cross back above S$4.00/L, our GRI model will move from Tier I to Tier II. Customers should be prepared for that scenario, not as a hypothetical, but as a likely outcome.
The structured band-based model is designed precisely to give customers visibility into these potential moves. Rather than reacting to ad hoc adjustments, customers can forecast cost exposure based on where diesel prices sit relative to the bands. When prices are at S$3.95, the question is not if they will cross S$4.00, but when.
Conclusion
The recent diesel price reductions are welcome, but they are not a signal of normalization. They are a temporary reprieve in a market that remains structurally volatile. The factors driving diesel prices—geopolitical risk, refining capacity constraints, and global supply tightness—have not abated.
We encourage customers to view the current Band 1 pricing as a transitional state, not a settled one. The GRI is here to stay, and the banding may well move back to Tier 2 in the near term. Our pricing model is built to provide clarity through that volatility—not to eliminate it, but to make it more predictable.
If you have questions about how the tiered GRI applies to your shipments, or how to plan for potential upward movements, our team is here to help.
References
1. Mint. (2026, July 21). Brent Crude tops $95 as US-Iran tensions, Hormuz blockade drive oil rally. https://www.livemint.com/market/commodities/brent-crude-tops-95-as-us-iran-tensions-hormuz-blockade-drive-oil-rally-11784714555942.html
2. Motorist Singapore. (2026, July). Latest Petrol Price Comparison in Singapore 2026. https://www.motorist.sg/petrol-prices
3. Maersk. (2026, July 14). Revision of Peak Season Surcharge (PSS) from Far East Asia to North Europe and Mediterranean (E1W/E2W). https://beta.maersk.com.cn/news/articles/2026/07/14/revision-of-pss-from-far-east-asia-to-north-europe-and-mediterranean
4. The New York Times. (2026, July 22). Houthis Claim Strikes on 2 Saudi Oil Tankers in Red Sea. https://www.nytimes.com/2026/07/22/world/middleeast/houthis-saudi-oil-tankers-red-sea.html
5. TASS. (2026, July 9). Strait of Hormuz ship traffic hits near-standstill amid US strikes — Bloomberg. https://tass.com/world/2157961
6. Maersk. (2026, July 6). Peak Season Surcharge (PSS) adjustment Far East Asia to Mexico, West Coast South America and Central America and Caribbean (C1E). https://www.maersk.com.cn/news/articles/2026/07/06/pss-far-east-asia-to-mexico-west-coast-latin-america
7. Reuters. (2026, July 20). Few tankers enter Hormuz to load oil, LNG floating storage rises, data shows. https://www.reuters.com/business/energy/few-tankers-enter-hormuz-load-oil-data-shows-2026-07-19/
8. Mint. (2026, July 25). Houthi Claim Missile Strikes on Southern Saudi Arabia. https://www.livemint.com/news/houthi-claim-missile-strikes-on-southern-saudi-arabia-11784959029525.html
9. UNITED NEWS OF INDIA. (2026, July 23). Houthi attacks on Saudi tankers raise Red Sea shipping concerns; Riyadh confirms vessel fire. http://www.uniindia.com/houthi-attacks-on-saudi-tankers-raise-red-sea-shipping-concerns-riyadh-confirms-vessel-fire/world/news/3918979.html
10. China.org.cn. (2026, July 27). Houthi source says the group attacked 3 Saudi oil tankers. http://www.china.org.cn/world/Off_the_Wire/2026-07/27/content_118618674.shtml
