Following is a question by the Hon Lothair Lam and a written reply by the Secretary for Environment and Ecology, Mr Tse Chin-wan, in the Legislative Council today (October 7):
 
Question:

     The Government's two-month Diesel Subsidy Scheme, the reduction in tunnel tolls for commercial vehicles and the fuel subsidy for liquefied petroleum gas (LPG), which were introduced to alleviate pressure on public transport and the logistics sector caused by rising fuel prices, expired on June 29, July 16 and July 30, respectively. However, it has been reported that tensions on the international stage persist. Crude oil and refined oil product prices remain persistently high and are increasing. Consequently, the land and maritime public transport sectors, local passenger transport and commercial vehicles and the transport industry are suffering greatly. These sectors are subject to fare regulation and contractual obligations. In this connection, will the Government inform this Council:

(1) of the weekly fluctuations in the retail prices of diesel and LPG in the Hong Kong market from January to the end of September this year (set out in table form), together with a comparison with import prices;

(2) the utilisation of the approximately HK$1.8 billion in funding approved for the Diesel Subsidy Scheme;

(3) the Chief Executive has directed the establishment of the Inter-departmental Task Force on Monitoring Fuel Supply to examine the impact of oil price fluctuations on various industries; based on the Task Force's monitoring, of the sectors that have been most severely affected, and whether any chain reaction has occurred;

(4) whether the Consumer Price Indices from March to August this year have reflected the rise in fuel prices resulting from price fluctuations, and the impact on inflation; if so, of the rate of change; and

(5) whether, in light of the persistently high retail fuel prices, the authorities will consider reintroducing subsidies and implementing other measures to support the land and maritime public transport sectors, local passenger transport and commercial vehicles and the transport industry that rely on fuel, to help them weather the difficulties; including whether they will consider establishing a fuel surcharge mechanism for the public transport sector to help it cope with abnormal fuel market fluctuations and maintain service stability?

Reply:

President,

     Since the outbreak of the conflict in the Middle East region, the Government has been closely monitoring geopolitical changes and tracking fuel supply and price fluctuations. The Inter-departmental Task Force on Monitoring Fuel Supply (the Task Force), led by the Financial Secretary, was established to ensure the stability of Hong Kong's energy supply, and closely examine the impact of oil price fluctuations on various industries.

     The Task Force had introduced various time-limited measures, including a two-month Diesel Subsidy Scheme (the Scheme) that commenced implementation on April 30 to provide support for public and commercial vehicles and vessels, and related industries that use diesel as fuel. The Scheme ended at midnight on June 30. The Government also introduced toll waiver and liquefied petroleum gas (LPG) fuel subsidy for commercial vehicles to alleviate operators' operating costs and help the transport industry cope with the additional fuel costs resulting from the conflict. The toll waiver and LPG fuel subsidy ended on July 16 and July 30 respectively. In considering whether and how to introduce support measures, the Task Force has been upholding the following principles:

1. Given that fluctuations in crude oil prices have a broad impact across society and considering the Government's fiscal constraints, priority should be given to the operational sectors that are most severely affected and that involve public services;

2. If the service prices of the operational sectors are subject to regulatory approvals by the Government, these matters shall be addressed through the existing approval mechanisms;

3. The use of private vehicles for self-use shall not be considered a primary priority since this is a matter of personal decision with alternative options available;

4. Given the unpredictability of the military conflict and the ongoing ceasefire negotiation, any support measures shall be temporary and short-term in nature, so as to avoid creating risks to public finances; and

5. Public transport services (including franchised and non-franchised buses, minibuses and ferries) as well as school buses and residential buses, whose operating costs are highly susceptible to fluctuations in diesel prices, should be regarded as priority sectors for consideration of support.

     In consultation with the Office of the Government Economist and the Transport and Logistics Bureau, the consolidated reply to the question raised by the Hon Lothair Lam is as follows:

(1) The monthly retail prices at petrol filling stations (PFSs) and the corresponding import prices of diesel and LPG from January to August 2026 are set out in Annexes I and II respectively. When interpreting the relevant data, one should take note of the following points:

1. generally speaking, local retail prices of auto-fuels are determined by oil companies having regard to market principles, and depend on a host of factors, such as the cost of purchasing imported refined products, transportation and storage costs, operating costs, land premium and tax. Therefore, changes in local retail prices of auto-fuels may not correspond exactly to or synchronise with movements of international crude oil or refined oil product prices;

2. diesel has a wide range of applications, which include the transport and maritime sectors as well as the laundry industry and the construction sector. It is understood that around 85 per cent of diesel sales are conducted through contracts between oil companies/diesel distributors and individual customers instead of through PFSs. Contractual supply of diesel involves fixed transportation and storage costs, and does not follow the prices displayed at PFSs. According to individual oil companies/diesel distributors, the offered discounts can be as high as $27 per litre; 

3. the prices listed at Annexes I and II do not take into account the subsidies provided under the Scheme and the LPG fuel subsidy scheme during the periods from April 30 to June 29, and May 31 to July 30 respectively. As far as the Scheme is concerned, the oil companies advised the Government that they had minimised adjustments to auto-fuel prices as far as possible during the implementation period of the Scheme, and that the local auto-fuel prices had not fully followed the surge in international refined oil prices or the increases in auto-fuel prices in other regions. Besides, under the Scheme agreements signed between the Government and the various oil companies and distributors, oil companies and distributors are required to specify the subsidy amount and the selling price on invoices issued to customers to ensure that users benefit from the subsidy; and

4. the shipping routes through the Strait of Hormuz became significantly disrupted again since this July, and there were reports in September that the Saudi Arabia's overland oil pipelines had been attacked. These had set the freight (Note 1) and insurance costs (Note 2) to rise continuously, which are now well above the levels in March to May this year when the conflict in the Middle East emerged. These had also made the increase of average retail price of automotive diesel markedly greater than the increase in its import price in this August.

     Following the United States' plan in late September to resume negotiation with Iran in early October, oil companies, at the Government's pushing, stated that they would begin to gradually reduce the retail prices of automotive diesel in response to changes in international refined oil product prices. The Environment and Ecology Bureau will continue its monitoring work in this regard.

(2) The Finance Committee of the Legislative Council approved a commitment of HK$1.8 billion for the Scheme on April 10. In addition to the five major oil companies, there were 66 designated distributors participated in the Scheme. With the voluminous data, we have yet completed the review of all Assurance Reports and Audit Reports submitted by the oil companies and designated distributors. Therefore, audited figures are not yet available for now. We will carefully review the Assurance Reports and Audit Reports submitted by the relevant companies to ensure proper disbursement of subsidies. 

(3) According to the Office of the Government Economist's analysis, Hong Kong is a predominantly service-oriented economy, and is relatively less reliant on energy. However, certain sectors with a higher proportion of energy costs in their overall cost structure, such as the transport sector, are more susceptible to the impact of high oil prices. As to whether a chain reaction would occur, the actual impact of rising fuel prices varies depending on factors such as the proportion of fuel costs in the total costs of each sector, the duration of fuel price fluctuations, the ability of businesses to absorb these costs, and market competition; it is therefore difficult to generalise.

     In response to the conflicts in the Middle East, the Task Force introduced a number of targeted, time-limited measures to alleviate the impact of rising fuel costs on affected sectors. All sectors that use diesel, such as the transport and maritime sectors, as well as the laundry industry and the construction sector, were benefited.

(4) Fuel price is one of the factors affecting inflation, but the overall change in consumer prices is also influenced by food, housing, dining-out, service, rents and other factors. The underlying inflation rate picked up between March and August 2026, partly driven by increases in the prices of fuel-related items. However, price pressures in other major components remained broadly contained, and overall inflation therefore stayed moderate. The year-on-year increase of underlying Composite Consumer Price Index (CCPI) picked up from an average of 1.3 per cent in the first two months to 1.9 per cent in August. For the first eight months of the year, the underlying CCPI increased by 1.7 per cent year-on-year. 

(5) Generally speaking, the operating costs of public transport operators (operators) comprise multiple items, including manpower, fuel and maintenance. In response to rising operating costs, a more prudent approach is to handle the matter as needed under the existing fare adjustment mechanisms, whereby the Government considers comprehensively factors such as the operators' operating environment, cost changes and public affordability. Such an approach also provides greater certainty with respect to the public transport fares paid by the general public. The Government will continue to maintain close communication with operators to explore different measures that facilitate operation, increase revenue and reduce costs, thereby enhancing operational efficiency and improving financial situations.

Note 1: According to the Drewry World Container Index compiled by Drewry, a London-based maritime consultancy, overall freight costs by end-September had surged by nearly 1.3 times comparing with that in March 2026 when the Middle East conflict emerged.

Note 2: According to market intelligence, the relevant war risk premium rose sharply from around 1-1.5 per cent of the tanker's value in March 2026 to about 7.5-10 per cent in end-July 2026.

Ends/Wednesday, October 7, 2026
Issued at HKT 11:50

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