Resumption of public service and special arrangement of Consumer Advice Centres
Consumer Advice Centres located in Tsim Sha Tsui, North Point, Sha Tin and Tsuen Wan have resumed normal service.
To reduce the risk of the spread of COVID-19, social distancing and other precautionary measures will be implemented at our Advice Centres.
Visitors are required to:
- Make prior appointment for service by calling the hotline 2929 2222;
- Wear surgical face masks and take a body temperature check before entering the Centres;
- Wait in a designated waiting area in order to reduce social contacts with other visitors.
(Notes: Visitors may experience a longer waiting time because of the precautionary measures.)
Auto-fuel Price Monitoring Analysis 2020
International crude oil prices have dropped sharply recently to the point that New York oil prices once dropped to minus US$40 a barrel in April for the first time in history. Given Hong Kong is well-known to have the highest auto-fuel retail price in the world, car owners who pay for the most expensive auto-fuel are all hoping for it to drop in line with the international oil prices. However, the auto-fuel price in Hong Kong remains at a high price level, aggravating the long-standing issues of “high auto-fuel price, low transparency” and the allegation of “price-fixing” amongst oil companies.
Abided by the “Consumer Council Ordinance”, the Consumer Council (the Council) has always been concerned and monitoring the auto-fuel price in Hong Kong and its impact on consumers. The Council has published two reports of auto-fuel price monitoring analyses in 2015 and 2016. In the reports, it indicated that the local auto-fuel pump price was recorded with the signs of “Quick Going Up, Slow Coming Down”, and “Not More Going Up, but continued to Less Coming Down” respectively. In view of the recent drastic changes in the international oil market, this analysis undertook previous research methods, with a period of up to 7 years (from 2013 to the first quarter of 2020), to review the changes, correlations, and price gaps between the 3 sets of data namely the Brent crude oil price, monthly import price of unleaded motor gasoline to Hong Kong after refining, and average pump price of standard petrol in Hong Kong. The results of the analysis are as follows:
Pump Price Gaps with Brent Crude Oil Price and Import Price Widened Almost One Fold
The analysis reveals that over the period from 2013 to the first quarter of 2020, the highest and lowest monthly price gap between the average pump price and Brent crude oil price has been increased by 85.2%. In the same period, the highest and lowest monthly price gap between the average pump price and import price has even been increased by 107.9%. The highest gaps of $9.48/L and $8.44/L of the two sets of data are both recorded in March 2020. It indicates that the monthly pump price gaps with Brent crude oil price and import price have been continuously widened over the past 7 years. In particular, after the second half of 2016, even when there was a relatively stable Brent crude oil price, the spread still continued to widen.
Despite the Brent Crude Oil Price and Import Price Returned to the Levels in Early 2016, Pump Price Now $3/L More Than 4 Years Ago
Data show that although in March 2020, Brent crude oil price and import price both fell back to the levels similar to the first quarter of 2016, pump price before tax saw an increase of more than $3, from $7.9/L in March 2016 to $11.15/L in March 2020. It is worth noting that the demand for auto-fuel in Hong Kong is fairly stable. Oil companies are also active to procure at times when oil price is lower while keep reiterating that various operating costs have risen, such as land costs of the gas stations and daily expenses, etc. However, given government tax on auto-fuel has not changed over the past 4 years, the reality is Hong Kong car owners are paying $3 more for every liter of auto-fuel which the root cause for such increase is worth studying. However, as a result of the lack of transparency in import prices and costs, it is difficult for the Council and other stakeholders to further dissect the components of the $3 increment. The Council urges the Government and oil companies to disclose relevant data, in order to strengthen understanding of the industry and to address this public concern.
Except 2014, Sign of "More Going Up, Less Coming Down" in Pump Price Over the 7 Years
According to the data collected by the Council over the past 7 years, it is found that although there are cumulative reduction of Brent crude oil price and import price of $4.3/L and $3.68/L respectively from 2013 to the first quarter of 2020, the cumulative change of pump price recorded a reverse trend and raised by $0.1/L. It indicates that the price gaps between the cumulative change in pump price and the cumulative changes in Brent crude oil price and import price are more than $3 in the past 7 years. Specifically, in comparison with Brent crude oil prices, when reducing the pump price, the cumulative reduction was “lesser” by $2.4/L and when increasing the price, the cumulative increase was “more” by $1.99/L. Similarly, in comparison with import price over the past 7 years, when reducing the pump price, the cumulative reduction was “lesser” by $0.68/L and when increasing the pump price, the cumulative increase was “more” by $3.09/L. The Council conducted the analysis on the cumulative increase and decrease of the 3 sets of data over these 7 years, thus could reduce the time-lag effect of the data and provided an objective observation on whether oil companies have adjusted their pump prices following the changes in Brent crude oil price and import price.
No Sign of “Quick Going Up, Slow Coming Down” in Recent Years, But a High Level of Conformity of Pump Prices Amongst Oil Companies
The Council also analyzed on the responsiveness of the daily pump price when Brent crude oil price changes, i.e. if time-lag effect exists. A significant relationship was found between the rise in the Brent crude oil price and the subsequent rise in the average pump price in the first half of 2015 (7 days), the first half of 2019 (5 days) and the second half of 2019 (1-2 and 7-8 days); and a significant relationship between a fall in the Brent crude oil price and the subsequent fall in the average pump price in the second half of 2014 (8 days), the second half of 2015 (1 and 7 days) and the second half of 2016 (9 days). For the rest of the times, there seems no sign of "Quick Going Up, Slow Coming Down" particularly in recent years.
Nonetheless, according to the Council’s Oil Price Database, except 2015, 2016 and 2018, the percentage of number of days the 5 oil companies having identical pump prices was rising. In 2019, the level of conformity in pump price reached 86.8%, an increase of 14.5% as compared with the previous year. The historical high of 92.3% was also recorded in the first quarter of 2020.
The Council also analyzed the price adjustment behavior of the 5 oil companies and found that except the second half of 2015, the second half of 2016, and the second half of 2018, their behavior is very similar. Though the number of price change by companies might be different in certain periods, actually their prices were soon adjusted to the same level within days. For example, in the first quarter of 2020, 3 oil companies decreased pump price by $0.25, from $17.59 to $17.34 directly, while the other 2 companies decreased their prices in two phases, from $17.59 to $17.49 first, then further decreased from $17.49 to $17.34 within 2 days.
Since 2 new entrants entered the auto-fuel market in mid-2000, the market share of the number of petrol filling stations (PFSs) of the 3 major incumbent oil companies dropped from over 93% in 1998 to 67% in the second half of 2020. Despite the change in market share, it is observed that there is still a high degree of conformity amongst the oil companies in terms of auto-fuel retail prices in recent years. It has risen the public concern on whether the auto-fuel price is fair and reasonable.
Complexity of Discounts Types, Finding the Best Deal is Never Easy
Oil companies claimed that a variety types of discount and promotions were offered to consumers. But the various discounts or flash offers are intricate and created complexity and confusion for consumers to get the best deal. In fact, in absolute dollar term, consumers’ expense in every litre of standard petrol continues to go up. From 2016 to the first quarter of 2020, even after deducting the walk-in discounts, consumers have to pay $2.5 to $3.07 per litre more for 1 litre of standard petrol. Facing a surging expenditure on auto-fuel, some consumers even filed complaints with the Council stating they were misled by petrol coupon promotion offer of oil companies. The Council reiterates its past suggestion to the oil companies that a direct reduction of the pump price would be the most straightforward and popular offer for consumers.
Conduct a Regulatory Review and Strengthen Market Transparency for a Fair Market
With regard to the oil companies’ saying that they use Mean of Platts Singapore (“MOPS”) as the benchmark price rather the Brent crude oil price in their cost accounting and retail pricing decisions, since MOPS data is not publicly available and even if the Council spends a huge sum to subscribe the data, its usage is bound by the terms and conditions. Therefore, the Council continued to adopt the analysis on responsiveness of the local auto-fuel pump price according to the fluctuation of the Brent crude oil price, given the Council’s previous analysis clearly indicated that the local pump price is highly correlated with the prices of Brent crude oil and import oil. Auto-fuel price has a huge impact on public livelihood and high auto-fuel price will further increase burden on consumers when the general economy is receding. Despite facing a certain degree of difficulties in obtaining relevant data, the Council has collected and analyzed data from various resources, including its own auto-fuel price database, the Census and Statistics Department, and relevant publicly available information.
The Council opines that the oil companies as multinational corporations, should be able to increase transparency by disclosing more cost and sales information so as to alleviate the long-standing public concerns on the industry. In addition, to ensure an effective regulation and a sustainable development of the market under the premise of balancing Hong Kong people’s affordability, the Council hopes the Government would disclose more frequent and more detailed import oil price information for public scrutiny. In the long run, the Council recommends the Government should once again conduct a thorough regulatory review on the auto-fuel market to examine its pros and cons and to formulate a long-term development plan. The Competition Commission being the statutory body that monitors market competition should worth to be empowered to investigate the auto-fuel market. As of now, the Council advises consumers to pay attention to the different discount offers and compare them carefully just for the sake of enjoying the lowest auto-fuel price.