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《Auto-Fuel Trivia: Why Does Hong Kong Have the Highest Auto-fuel Pump Price in the World?》
Earlier this year, the New York crude oil price once dropped to an unbelievable minus $40 per barrel, which sent a shockwave to the market. However, car owners in Hong Kong have remained puzzled by the territory’s high auto-fuel prices against the big drop in international crude oil prices. Are oil companies in Hong Kong "price-fixing"? Do signs of “More Going Up, Less Coming Down” and “Quick Going Up, Slow Coming Down” exist in Hong Kong?
Widening gap between pump price and crude oil price / import price
The Consumer Council has always been concerned and monitoring the impact of local auto-fuel prices on consumers. After reviewing the data over the past 7 years from 2013 to Q1 2020, we have observed the following:
Average pump price vs. Brent crude oil price: the highest and lowest monthly price gap has widened by 85.2%
Average pump price vs. import price: the highest and lowest monthly price gap has been increased by 107.9%
In the past 7 years, the gaps between the pump price and both of Brent crude oil and import prices have widened. For example in March 2020, although Brent crude oil price and import price returned to the same price level in Q1 2016, and with the same auto-fuel tax and stable auto-fuel demand, the pump price still increased by more than HK$3 per litre.
Any sign of “Quick Going Up, Slow Coming Down”?
The Government has been emphasizing that it has urged oil companies to reduce their retail prices as soon as international oil prices fall. According to the data collected, we can see that from January to April 2020, oil companies had decreased auto-fuel prices for 11-13 times. During this period, international oil prices had significant fluctuation since March, and oil companies did adjust their prices more frequently than before (in total 7-9 times), the "Quick Going Up, Slow Coming Down" phenomenon did not appear to exist during this period.
A clear sign of “More Going Up, Less Coming Down ”
Using the data from 2013 to Q1 2020, we have compared the cumulative change in pump price and the cumulative changes in Brent crude oil price and import price over the 7-year period, and found that:
- Cumulative changes in pump price vs Brent crude oil price: during price drop, the reduction in pump price per litre was $2.4 “less”; and during price hike, the rise in pump price was $1.99 “more”
- Cumulative changes in pump price vs import price: during price drop, the reduction in pump price per litre was $0.68 “less”; and during price hike, the rise in pump price was $3.09 “more”