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Following is a question by the Hon Martin Liao and a reply by the Acting Secretary for the Environment, Ms Christine Loh, in the Legislative Council today (June 10):
Question:
According to the results of the analysis on the open data on international crude oil and local petrol pump prices from 2013 to 2014, published by the Consumer Council in February this year, there were signs of "quick going up, slow coming down" in the pump price adjustments made by the five local oil companies in specific periods. Moreover, while the international crude oil prices dropped continuously in the second half of last year, the oil companies did not lower the petrol pump prices to a corresponding magnitude. On the other hand, the authorities have pointed out that import price of refined oil products is only one of the costs of local petrol retail price, and the retail price also includes tax and other operating costs. In this connection, will the Government inform this Council:
(1) whether it knows the respective rates of increase in various operating costs of the various oil companies in the second half of last year; if it does, of such rates of increase; of the new measures the authorities have put in place to ameliorate the situation where petrol pump prices are "quick to go up but slow to come down", such as requesting the oil companies to make more frequent adjustments to petrol pump prices in response to the daily changes in international crude oil prices;
(2) as it is learnt that some countries regulate their oil industries by competition laws, and the Competition Ordinance of Hong Kong has yet to come into full operation, whether the authorities will request the Competition Commission to formulate measures to regulate petrol pump prices, such as requesting the oil companies to enhance the transparency of their mechanisms for adjusting petrol pump prices, so as to facilitate the monitoring by consumers; and
(3) as some members of the public have queried why public transport fares have not been lowered correspondingly given the continuous drop in international crude oil prices, whether the authorities know the percentages of fuel expenses in the operating costs of various public transport operators; if they do, of such percentages in the past three years; whether they know if public transport operators have plans to lower fares?
Reply:
President,
The consolidated replies of the Environment Bureau, Commerce and Economic Development Bureau and Transport and Housing Bureau to the above three questions are as follows:
(1) Retail prices of auto-fuels in Hong Kong are determined by oil companies having regard to commercial practices and their operating costs. The Government appreciates the impact of auto-fuels prices on the public. Therefore, according to the Government's policy to enhance competition, we have, since 2003, re-tendered all existing petrol filling station sites upon expiry of their leases, instead of renewing the leases with the existing operators. Also, we have removed the previous requirements that bidders of the sites have to hold auto-fuel import licence and supply contract. Since the introduction of these tendering arrangements, two new operators have successfully entered the market. The share of the three biggest operators in terms of the number of stations has dropped from over 90 per cent to about 70 per cent. At present, there are over 180 petrol filling stations in Hong Kong, operated by 6 companies. Given the size of the Hong Kong market, these tendering arrangements can effectively enhance the competition in auto-fuels retail market. Moreover, the Government has been monitoring the changes in local retail prices of auto-fuels and comparing them with the trend movements of international oil prices (benchmarked against the Singapore free-on-board (FOB) prices for unleaded petrol and motor vehicle diesel).
Hong Kong has no oil refinery. All auto-fuels sold locally are imported refined oil products instead of crude oil. Refined oil products (such as unleaded petrol and motor vehicle diesel) are products produced from crude oil after refinery processes and are different from crude oil. Therefore, changes in international crude oil price and prices of unleaded petrol and motor vehicle diesel are not necessarily the same. When comparing international oil prices and the local retail prices of auto-fuels, it is more appropriate to make reference to Singapore FOB prices (i.e. Means of Platts Singapore (MOPS)) and the prices of importing oil products by oil companies.
According to our data analysis, since the beginning of July 2014 and up to the end of May 2015, MOPS have accumulated a reduction of over 30 per cent. In this period, oil companies, in response to falling import prices, have adjusted downwards the pump prices of auto-fuels, with accumulated reduction of over $2 per litre. This is generally in line with the trend movements of international oil prices over the same period, and represents around 30 per cent of the import price of its refined oil products in July 2014 at $6.34 per litre. As a result of the rises in Singapore FOB price for unleaded petrol and diesel, oil companies have recently increased the pump prices of unleaded petrol and diesel. However, the magnitudes of increase in retail prices are lower than or the same as the rises in corresponding MOPS, and there is no sign of "quick going up and slow coming down". In addition, as oil companies offer various kinds of discounts and promotions to consumers (including those at the retail level), the actual prices paid by consumers are effectively lower than the pump prices listed in petrol filling stations.
In a free market economy, the operating costs data are commercially sensitive information. The Government does not have the power to ask commercially operating companies to disclose such information.
We have been in close contact with oil companies and urged them to promptly adjust prices in tandem with international oil price movements to lessen the burden on the public.
(2) The Competition Ordinance (the Ordinance) enacted in June 2012 provides a legal framework to tackle anti-competitive conduct (including price fixing, abuse of market power, etc) in various sectors, with a view to maintaining fair and sustainable competition in the market. The Competition Commission, which is established as an independent statutory body under the Ordinance, is empowered to investigate into an alleged anti-competitive conduct, either on receipt of complaints, on its own initiative, or on referral from the Government or a court, and to bring enforcement actions before the Competition Tribunal. We will collaborate with the Competition Commission on their study on the oil companies as appropriate.
In addition, the Government has endeavoured to improve the transparency of auto-fuels products prices to facilitate consumers to obtain sufficient information for making choices. In this regard, I would like to point out that we have posted onto our website, on a regular basis, the movements in local import prices and retail prices of auto-fuels and the Singapore FOB prices of unleaded petrol and motor vehicle diesel. We have also added the linkage to the statistics on import and retail prices of major oil products on the Environment Bureau' website. We have also commissioned the Consumer Council to launch the "Auto-fuel Price Calculator". The Consumer Council posts onto its website and smartphone applications daily the local auto-fuels retail prices and information on various types of cash and non-cash discounts offered by oil companies. Consumers can make better use of the relevant information to patronise a suitable petrol filling station.
(3) With regard to public transport services fuelled by oil products with regulated fares (such as franchised buses, green minibuses, taxis and ferries), there is no fuel surcharge for them. Fare adjustments have all along been made with reference to changes in costs and revenue in overall terms (instead of changes in fuel price alone) and do not have retrospective effect. In the past three years, the proportion of fuel cost to the overall operating costs had remained at about 25 per cent of the abovementioned road-based public transport services. That for ferry service had remained at about 35 per cent. The proportion has not changed significantly despite the notable drop in oil price since the second half of 2014. This is because the operating costs, apart from fuel cost, are made up of various components. They include wage, maintenance and insurance expenses which have basically been on an upward trend in recent years owing to an inflationary environment. In fact, the oil price has started to increase, by 35 per cent, from the lows in January 2015. The Government has all along been closely monitoring the impact of the fluctuation of oil price on fares of public transport services. At present, the relevant public transport operators have no plans to reduce their fares.
Ends/Wednesday, June 10, 2015
Issued at HKT 17:25
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