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Following is a question by the Hon Chan Hak-kan and a written reply by the Secretary for the Environment, Mr Wong Kam-sing, in the Legislative Council today (January 27):
Question:
It has been reported that while the prices of international crude oil and liquefied petroleum gas (LPG) have plunged by about 50 per cent since last year, the local retail prices of auto-fuels and domestic LPG have dropped only by some 30 per cent during the same period, reflecting the problem that retail prices "rise substantially but hardly fall". On the other hand, to improve the transparency of prices of auto-fuel products, the Environment Bureau posts onto its web site movements in local import and retail prices of auto-fuels on a weekly basis. In this connection, will the Government inform this Council:
(1) given that in April last year in reply to a question raised by a Member of this Council, the Government indicated that it was discussing with the oil companies about posting information on prices of domestic piped LPG on the Government's website, of the latest progress of such discussion and the details of the related arrangement; whether it has considered extending such an arrangement to other fossil fuel products, such as cylinder LPG;
(2) as the Government has indicated that "the present price adjustment mechanism of the oil companies is able to reflect movements of international LPG prices", whether it has studied the causes for the long-standing situation that the local retail prices of LPG "rise substantially but hardly fall";
(3) as some comments have pointed out that the retail prices of fuel products set by various oil companies have been more or less the same for a long time, arousing suspicion of "collusive price-fixing", whether it knows if the Competition Commission has launched any related investigation on its own initiative or in response to complaints; and
(4) whether it has any plan to publish, on a regular basis, information on suggested prices for auto-fuels and domestic LPG to let consumers know the reasonable prices?
Reply:
President,
President, the consolidated replies of the Environment Bureau and the Commerce and Economic Development Bureau to the above four questions are as follows:
(1) Subsequent to our reply to a question raised by a Member of the Legislative Council (LegCo) in April last year, we have contacted the three domestic piped liquefied petroleum gas (LPG) suppliers requesting them to enhance transparency of domestic LPG prices and publish the prices of their LPG products timely in response to the LegCo Member's request. Two of them have published the updated domestic piped LPG price on their websites since July last year. The other one responded that they are unable to publish price information of their domestic piped LPG products due to its company policy.
On the other hand, regarding whether to extend the above-mentioned arrangement to domestic cylinder LPG, oil companies expressed that the retail prices of domestic cylinder LPG are determined by individual distributors having regard to their own commercial strategies and market competition environment. They will not set any suggested retail prices of their cylinder LPG products for the distributors and neither will they require distributors to provide them with the resale prices. Also, with the implementation of competition law in Hong Kong, they have reservation to publish the prices of individual oil company on the Government's website.
(2) According to the price adjustment mechanism set up by a major local LPG supplier (the Company) on its own initiative since 1999, the Company, once every three months (i.e. at end of January, April, July and October), sets the 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. Saudi Arabia Contract Price), and making positive or negative adjustment for any difference between the actual import prices and the forecast import prices in the last review. According to our observation, the adjustments of listed price of piped LPG of other oil companies in the market generally follow that of the Company. As the difference between the forecast and actual import prices will be adjusted in the next review, the price of domestic LPG products would therefore reflect the movements of international LPG prices.
In summary, during each price adjustment review, we would ensure the Company makes adjustments in accordance with its forecast LPG import prices and makes the positive or negative price adjustments due to actual and forecast price difference in the last review. Therefore, the existing price adjustment mechanism should be able to reflect the changes in international LPG prices.
(3) The Competition Ordinance fully commenced on December 14, 2015. The Competition Commission, as the independent statutory body to implement the Ordinance, will handle matters relating to price fixing as appropriate.
(4) Retail prices of auto-fuels and domestic LPG in Hong Kong, similar to the prices of other consumer products, are determined by oil companies having regard to commercial practices and their operating costs. In a free market economy, the retail prices of auto-fuels in Hong Kong should be determined by the market. We do not consider that the Government should set a suggested retail price or an appropriate profit level for the fuels industry or other consumer products industries. The role of the Government is to endeavour to ensure a stable fuel supply, maintain market openness, and remove barriers to enter into the market to enhance competition. We also endeavor to improve the transparency of the prices of fuels products to facilitate consumers to make choices.
For auto-fuels products, we have commissioned the Consumer Council to post onto its website on a weekly basis, the local auto-fuels retail prices and information on various types of cash and non-cash discounts offered by oil companies, and to launch the "Auto-fuel Price Calculator" as well as relevant smartphone applications to promote price competition among oil companies and to facilitate consumers to make choices among the various discounts and benefits offered by oil companies. For domestic LPG products, as mentioned in (1), the majority of domestic piped LPG suppliers have published the updated domestic piped LPG price on their own website for customers' information.
Ends/Wednesday, January 27, 2016
Issued at HKT 12:33
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