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LCQ22: Prices of domestic liquefied petroleum gas
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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 22):

Question:

     At present, only one major liquefied petroleum gas (LPG) supplier has established a price adjustment mechanism, and other LPG suppliers generally follow the prices set by that supplier in adjusting the prices of domestic LPG (including centralised LPG and cylinder LPG) sold by them.  Some members of the public have relayed to me that this practice has resulted in LPG prices being quick to rise and slow to drop as well as an allegation of collusive price-fixing. In this connection, will the Government inform this Council:

(1) whether it knows the respective current numbers of households in Hong Kong using the two aforesaid types of domestic LPG (with a breakdown by District Council district);

(2) whether the authorities have studied ways to promote competition in the domestic LPG market; if they have, of the contents and findings of the study; if not, the reasons for that;

(3) whether the authorities will consider requesting various LPG suppliers to establish their own price adjustment mechanisms and regularly publish the details of the price adjustments they made;

(4) whether the authorities will consider publishing the data on the import and retail prices of LPG of various suppliers on government web sites for public inspection; and

(5) given that at present the specifications for cylinder LPG installations (such as the connecting equipment) are not standardised, and distributors often request users to buy the appliances sold by them to facilitate future provision of maintenance and repair services, whether the Government will consider introducing new measures to standardise the specifications for cylinder LPG installations and develop a common carrier system for gas fuel to allow users a free choice of domestic LPG distributors or suppliers, thereby promoting market competition?

Reply:

President:

     The consolidated replies of the Electrical and Mechanical Services Department and the Environment Bureau to the above five questions are as follows:

(1) In 2014, the number of household users in Hong Kong using piped and cylinder LPG was about 220,000 and 210,000 respectively.  The approximate number of the former in each District Council district is shown in Annex.  We do not have similar figures for the latter.

(2) In a free market economy, the prices of domestic LPG (including piped LPG and cylinder LPG) are determined by oil companies having regard to commercial practices and their operating costs. At present, there are three and five LPG suppliers supplying piped and cylinder LPG respectively in Hong Kong. We understand that LPG suppliers generally provide different discounts to the estates using LPG and the retail prices of cylinder LPG charged by different suppliers are not the same.  These reflect that certain price competition exists in the market.

(3) According to the price adjustment mechanism set up by a major local LPG supplier (the Company) on its own initiative, 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 prices of piped LPG and wholesale prices of cylinder LPG of other oil companies in the market generally follow those of the Company.  Their price adjustments therefore also reflect the movements of international LPG prices.

     We consider that it is of paramount importance that the prices of domestic LPG can reflect the movements of international LPG prices. Since the present price adjustment mechanism is able to reflect the movement of international LPG prices, we consider it not necessary to request LPG suppliers to separately establish their own LPG price adjustment mechanisms.

(4) Regarding publication of price information, in accordance with the Import and Export (Registration) Regulations, importers are required to lodge trade declarations with the Customs and Excise Department, and the Census and Statistics Department compiles import price statistics based on the information in the trade declarations and provides the relevant statistics to the Panel on Economic Development of the Legislative Council. The public can access the relevant import prices and the average retail prices of domestic cylinder LPG through the Legislative Council's website. We have recently added the linkage to this information on the Environment Bureau's website. Also, we are discussing with the oil companies on whether the price of piped LPG can be posted on the Government's website.

(5) The Electrical and Mechanical Services Department advises that customers are basically free to purchase their own gas appliances and choose their own cylinder LPG supplier irrespective of whether the specification of a LPG installation (such as the connector) is standardised or not. We understand that suppliers would change the connector free of charge to suit their supplied cylinder LPG.

     Based on the characteristic of LPG, it is not suitable for city network transmission. In general, LPG supply installation is erected within the area of a residential estate where LPG will be transmitted from a store to the consumers through gas pipework. Hence, taking into account the land constraint, gas risk, economical benefit, etc., LPG is considered not suitable for common carrier system.

Ends/Wednesday, April 22, 2015
Issued at HKT 14:44

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