Hong Kong oil companies' pricing strategy is brought into question

Oil prices in Hong Kong have been quick to go up, but slow to come down compared with undulations in international crude prices, said the Consumer Council on Thursday.

In the first half of 2013, oil companies raised pump prices just four days on average after an increase in international crude oil prices. But it took them an average of eight days to reduce retail auto-fuel price after every price drop in crude oil in the second half of last year, the council's research showed.

The research was carried out between January 2013 and December 2014 by analyzing five local petrol station operators, including Caltex, Esso, PetroChina, Shell and Sinopec.

The council noted that international crude price has dropped a total of 53.9 points between July 1 and Dec 31, 2014, but the average local auto-fuel prices before tax was reduced only by 24.1 points in the same period. The price gap of the average prices of auto-fuel and the Brent crude oil has widened from HK$5.53 per liter on average in the first half of 2013 to HK$6.01 in the second half of 2014.

According to the council's analysis based on the monthly import prices of auto-fuel, the price gap between import and pump prices widened continually with the average price increasing from HK$4.36 per liter in the first half of 2013 to HK$4.9 per liter at the end of 2014.

"During the time when international crude oil prices were on the decrease continuously and if only the oil cost was taken into account, oil companies' product cost margin on every liter of auto-fuel was on constant increase as the adjustment magnitude of auto-fuel prices was relatively narrow," said the council in a report.

The report also carries oil companies' response in which they said the import price of auto-fuel is only one of the many factors considered when adjustment in pump prices is made. The other factors include discounts, insurance, land premium and costs in safety and environment protection. Adjustment magnitude in these operating costs may not be entirely tied in with the change in international crude oil prices.

The council's Chief Executive Gilly Wong Fung-han said it was unclear whether there was any profiteering without access to commercial sensitive information such as cost structures, inventory and market share of each oil company.

She urged the government and oil companies to increase transparency and make available more information to help consumers better understand the change in oil prices.

felix@chinadailyhk.com

Hong Kong's consumer group urges oil companies to be more transparent in pricing to avoid controversies. Roy Liu / China Daily

(HK Edition 02/06/2015 page8)