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Following is a question by the Hon Leung Kwok-hung and a written reply by the Secretary for the Environment, Mr Wong Kam-sing, in the Legislative Council today (January 30) :
Questions:
Members of the public have relayed to me time and again that the three liquefied petroleum gas (LPG) suppliers adjusted upwards the retail prices of domestic LPG (including cylinder LPG and centralised LPG supplied to housing estates) in November last year, and that the new prices represent shocking rates of increase between 29% and 36% as compared with those in the preceding three months, which far exceeded the inflation rate during the same period, aggravating the burden on people's livelihood. At present, Hong Kong's domestic LPG suppliers determine their retail prices mainly on the basis of international contract prices of LPG (i.e. the free-on-board contract prices charged at the port of loading made public by the oil companies in Saudi Arabia on the first day of each month). According to the figures provided by the Bureau of Energy, Ministry of Economic Affairs of Taiwan, the average contract price in 2011 was about US$850 per tonne, and that of the first 11 months of 2012 was about US$910, representing a rate of increase of 7%. A comparison between the prices of October and November 2012 (US$995 and US$1,020 per tonne respectively) shows a mere rate of increase of 2.5%, which differs significantly from the price increase of domestic LPG in Hong Kong over the same period of time. Moreover, it has been learnt that LPG prices of Hong Kong are the highest when compared to those of the neighbouring places of similar level of economic development. According to the figures published by CPC Corporation of Taiwan on December 2, domestic LPG prices per kilogram after taxation were NT$30.06 in Taiwan, NT$41.3 in Korea, NT$48.73 in Japan and NT$54.34 in Hong Kong. In this connection, will the Government inform this Council:
(a) whether it knows the current number of households in Hong Kong using the above two types of domestic LPG;
(b) given that the domestic LPG pricing mechanism adopted since 1999 by one of the major local LPG suppliers has long been accused of being quick in raising and slow in reducing prices, and currently international LPG prices are announced on the first day of each month, whether the Government has considered requesting LPG suppliers to review domestic LPG prices every month for greater price flexibility; if it has, of the details; if not, the reasons for that; and
(c) given that LPG prices in Hong Kong are the highest in the region, and the only yardstick for determining price is market price, whether the Government will consider putting in place price control and adjustment mechanism in the domestic LPG market, as well as adopting alternative criteria other than market price with reference to the practices adopted by the neighbouring countries, so as to minimise the impact of LPG price changes on people's livelihood; given that it has been reported that Taiwan's oil companies, in response to the Taiwan Government's policy of maintaining price stability and caring of people's livelihood, did not raise domestic LPG prices in November last year but waited to recover the shortfall until a future price drop, whether the Government will formulate similar price adjustment mechanism so as to alleviate people's hardship; if it will, of the details; if not, the reasons for that?
Reply:
President,
(a) In 2012, there were about 250,000 domestic households using cylinder LPG and 230,000 households using piped LPG in Hong Kong.
(b) In accordance with existing mechanism, a local oil company sets the domestic LPG prices for the coming three months by forecasting the import prices for the coming three months in light of the latest international LPG price (i.e. contract prices of LPG from Saudi Arabia), and making positive or negative adjustment for any difference between the actual import prices and the forecast import prices in the last review. The review of operating costs is conducted once every year at end January.
In monitoring domestic LPG prices, we make reference to the movement of international LPG prices and local LPG import prices and check whether the oil company's price forecasts are reasonable. We will also follow up with the oil company the positive or negative price adjustments due to actual and forecast price difference in the last review, and assess if the annual adjustment in operating cost is reasonable.
Regarding the suggestion to change the review frequency of domestic LPG prices from once every three months to once every month, we consider that more frequent review may lead to more volatile domestic LPG prices. When the international LPG prices go up, suppliers will raise the price in a time earlier than that under the current practice, which may not be acceptable to the consumers. Instead, the current price adjustment mechanism of quarterly revision can better maintain price stability and provide for positive or negative adjustments.
(c) The fuel prices in Hong Kong are determined by individual oil companies with regard to commercial principles and their operating costs. The Government understands and is concerned about the impact of LPG prices on the public, and hence encourages the industry to enhance the transparency of price setting. We are also committed to ensuring a reliable supply of energy. According to existing adjustment mechanism, prices of domestic LPG are adjusted once every quarter, during which the international LPG prices may go up and down, the actual adjustment for the coming quarter will be determined after first offsetting the previous movements. We consider that the related arrangement has served the purpose of stabilising the gas price.
Ends/Wednesday, January 30, 2013
Issued at HKT 15:15
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