LPG PRICES
The Consumer Council notes the proposed LPG price reduction by Shell of 40 cents per kg on its net selling price to dealers, as a step in the right direction, but one that is well overdue.
The Council has been informed by Shell that due to a number of cost considerations and the need to factor in past seasonal fluctuations, a greater reduction is not feasible.
The Council has always maintained that the most efficient mechanism for determining reasonable prices is through vigorous competition, at every level in the chain of supply from the product source to its end use. It is not appropriate for the Council or the Government to set prices.
Shell has stated that its pricing is a reflection of competition that exists in the LPG market. However, the LPG wholesale price reduction reflects mainly the decline in import cost. In a competitive market, oil companies and their dealers can be expected to also keep their operational costs and their retail prices as low as possible, and to pass on the benefits of such reductions to consumers.
The Council is undertaking a study on the petroleum industry that will analyze the different functional levels that contribute to the costs of unleaded gasoline, diesel and LPG, in order to understand the various cost considerations and competition in those products.
Shell has indicated it will introduce a new pricing review mechanism for LPG. The Council will consider this mechanism in the context of its petroleum industry study.