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Following is a question by Dr the Hon Elizabeth Quat and a written reply by the Secretary for the Environment, Mr Wong Kam-sing, in the Legislative Council today (April 29):
Question:
It has been reported that international oil prices fell by a cumulative 30 per cent during the whole of last year, while retail fuel prices in Hong Kong dropped merely by about 10 per cent in the same period. There are comments that as fuel prices have a significant impact on people's livelihood, the Government is duty-bound to monitor them strictly. In this connection, will the Government inform this Council:
(1) whether, under existing government policies, there is any regulation of the determination of retail fuel prices by oil companies; if so, of the details; if not, the reasons for that;
(2) as retail fuel prices in Hong Kong have all along been criticised for being "quick to rise and slow to drop", whether the Government will formulate policies to eradicate such situation, so as to protect consumers' interests; if so, of the details; if not, the reasons for that; and
(3) as some members of the transport sector have suggested that the Government should classify fuels as strategic commodities for stepping up monitoring, whether the Government has studied the feasibility of such a suggestion, and whether such practice can better protect consumers' interests; if it has studied, of the details; if it has not studied, the reasons for that?
Reply:
President,
(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 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). We have been in close contact with oil companies and in time of international oil price reduction, urge them to adjust prices promptly to lessen the burden on the public.
(2) 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. The Government observes that the trend movements of local retail prices of auto-fuels and MOPS are generally in line and there is no sign of "quick going up and slow coming down". However, the changes in prices are not exactly the same in terms of magnitude and frequency due to the following reasons:
(a) MOPS prices fluctuate day to day, but oil companies do not adjust their auto-fuels price daily;
(b) Import price of refined oil product is only one of the costs of local retail price. Retail price also includes tax ($6.06 per litre for unleaded petrol and tax free for diesel), and other operating costs, such as land costs, government rent, staff costs, transportation, promotion, operation of oil terminal, etc. When oil companies adjust their prices, apart from the import prices of oil products, they also take into account changes in these operating costs; and
(c) Oil companies generally provide various kinds of discounts and promotions to customers and drivers. Therefore, the actual selling prices of auto-fuels are effectively lower than their listed pump prices.
When the international oil prices drop, the percentage change in pump 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 pump prices will be smaller than that of the international oil prices. Therefore, it is not appropriate to simply compare the percentage change of local auto-fuels pump prices with that of international oil prices.
To sum up, we do not consider that the Government should set an appropriate retail price for the auto-fuels industry or other consumer products related industries in a free market economy. The role of the Government is to make its best effort 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 transparency of auto-fuels products prices to facilitate consumers to obtain sufficient information for making choices.
(3) The purpose of trade control on strategic commodities in Hong Kong is to regulate the import and export of munition items to prevent Hong Kong from being used as a conduit for the proliferation of weapons of mass destruction. The control on strategic commodities is not relevant to price control.
According to the Oil (Conservation and Control) Ordinance (Chapter 264), the Government could regulate the storage, supply, acquisition, disposal or consumption of oil under special circumstances. The Government has also drawn up a contingency plan to coordinate the implementation of energy conservation measures by both the public and the private sectors, as well as the allocation and consumption of oil in the event of a disruption in oil supply.
Ends/Wednesday, April 29, 2015
Issued at HKT 14:40
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