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Following is a question by the Hon Emily Lau and a written reply by the Secretary for the Environment, Mr Wong Kam-sing, in the Legislative Council today (May 27):
Question:
It has been reported that members of the public are concerned about the situation that the retail prices of auto-fuel have been quick to rise and slow to drop in recent months, and the various oil companies are alleged of collusive price-fixing as they have made similar numbers of adjustments of oil prices. In addition, when the international crude oil price drops, the oil companies often do not lower auto-fuel prices by similar magnitude, and the price adjustment mechanism also lacks transparency. In this connection, will the Executive Authorities inform this Council:
(1) whether they will, by making reference to the practice of the Macao Government, set up a dedicated committee to monitor issues relating to adjustments in auto-fuel retail prices, study the operating cost structures of oil companies, and keep track of the sales cycles and the stock levels of auto-fuel; if they will, of the details; if not, the reasons for that;
(2) whether they have plans to request oil companies to make public more information relating to auto-fuel retail prices (such as the sales cycles and the stock levels), analyze regularly the trend movements of auto-fuel retail prices, and assess if the timing and magnitude of price adjustments are reasonable and transparent; if they have such plans, of the details; if not, the reasons for that; and
(3) whether they have plans to investigate how oil companies determine auto-fuel prices, so as to find out if oil companies have engaged in anti-competitive practices; if they have such plans, of the details; if not, the reasons for that?
Reply:
President,
(1) and (2) Retail prices of auto-fuels in Hong Kong are determined by oil companies having regard to commercial practices and their operating costs. In a free market economy, information related to retail prices of auto-fuels (e.g. inventory level and sales turnover cycle) are commercially sensitive information of oil companies. It is not within the powers of the Government to ask the oil companies to provide such detailed information. Neither it is appropriate for the Government to do so. However, the Government appreciates the impact of the auto-fuels prices on the public and 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 (i.e. Means of Platts Singapore (MOPS))). In time of international oil price reduction, we will contact and urge oil companies to adjust prices promptly to lessen the burden on the public.
Some members of the public considered that while the international oil prices have dropped significantly in the past few months, the magnitudes of reduction in retail prices of auto-fuels are smaller than that, and there is a sign of "quick going up and slow going down". They have this impression because they compare the percentage change of retail prices against that of international oil prices directly. They perceived that when international oil prices dropped by 50 per cent, the retail prices should be adjusted in the same magnitude. This is indeed not an appropriate analysis because current retail prices of auto-fuels comprise three components, namely:
(a) Costs of importing oil products;
(b) Tax ($6.06 per litre for unleaded petrol); and
(c) Other operating costs, such as staff costs, transportation cost, oil terminal operation cost, land costs, etc.
As such, when international oil prices drop, the percentage change in retail prices must be lower than that of the international oil prices given the amounts of tax and other operating costs remain unchanged. On the contrary, when international oil prices rise, the magnitude of increase in retail prices will be smaller than that of the international oil prices.
According to our observation, since the beginning of July 2014 and up to the end of March 2015, the import price of refined oil products have accumulated a reduction of about 50 per cent. In this period, oil companies, in response to falling import prices, have adjusted downwards the retail prices of auto-fuels, with maximum accumulated reduction of over $3.2 per litre. We observe that this is generally in line with the trend movements of international oil prices over the same period, and represents around 50 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 MOPS for unleaded petrol and diesel, oil companies have recently increased the retail 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. We do not observe any sign of "quick going up and slow coming down".
The Government has all along encouraged the industry to enhance transparency on their price setting and prices. We also provide various information to enhance the transparency of the prices of oil products to facilitate consumers to make choices. In this regard, we post 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's website. In addition, we have commissioned the Consumer Council (CC) to launch the "Auto-fuel Price Calculator". The CC 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.
To sum up, retail prices of auto-fuels in Hong Kong are determined by oil companies having regard to commercial practices and their operating costs. According to our observation, the trend movements of local retail prices of auto-fuels and MOPS are generally in line. In a free market economy, we need to strike a balance between enhancing transparency and safeguarding commercially sensitive information.
(3) 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. According to our understanding, the Competition Commission will conduct investigation on whether the oil companies engage in anti-competitive behaviour in setting the prices of auto-fuels. If necessary, we will collaborate with the Competition Commission to facilitate their work in this regard.
Ends/Wednesday, May 27, 2015
Issued at HKT 13:38
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