Hong Kong’s chart-topping auto-fuel retail price is among the most expensive in the world. Long concerned about the local auto-fuel price in Hong Kong and its impact on consumers, the Consumer Council has consistently monitored the situation. In its “Auto-fuel Price Monitoring Analysis” report published in 2020, the Council pointed out various phenomena of pump prices in Hong Kong, including “going up more, coming down less”, a high level of conformity, and low transparency, etc. Despite the sharp rise in Hong Kong’s electric vehicle (EV) numbers in recent years, petrol cars still account for almost 90% of the private car market. With consistently high oil prices, many vehicle owners in Hong Kong are enduring hefty auto-fuel prices. As consumers continue to be concerned about the rising auto-fuel retail price in the local market, along with the fact that discounts offered by oil companies have become increasingly complicated, the Council undertook a new round of study utilising data from a period of 5.5 years (from 2018 to the second quarter of 2023) to review the fluctuations and price gaps between 4 sets of data, namely the Brent crude oil price, import price of local unleaded petrol, petrol pump price, and retail price after deducting walk-in discount. Analysis of the above data, with reference to other relevant information, revealed the following 4 phenomena:
- Widening Import Price Gaps with Pump Price and Retail Price
“Going Up More, Coming Down Less” Persists
The Brent crude oil price, import price, pump price and retail price showed similar overall trends during the period from 2018 to the second quarter of 2023, but were adjusted in greatly diverse magnitude. Over the course of 5.5 years, the pump price and retail price have increased by 75.9% and 57.7% respectively, far exceeding the 20.8% increase in import price, further widening the gap between the former two and the latter. In early 2018, the gap between the average pump price and import price was $5.55 per litre, and that between the retail price and import price was $4.19 per litre. The gaps continued to widen subsequently, eventually reaching the widest of $12.33 per litre between the average pump price and import price, and $9.51 per litre between the average retail price and import price, both swelling by over 120%.
From October 2022 to March 2023, the monthly import price per litre dropped by 10.3% from $5.92 to $5.31, yet the pump price of the 5 oil companies remained the same during this period, reflecting that the pump price had no downward adjustment in line with the change in import price.
Furthermore, the phenomenon of “going up more, coming down less” persisted throughout these 5.5 years. Upon comparing the cumulative changes for the pump price and import price each year, the greatest difference was recorded in 2022, during which the import price was reduced by $0.03 per litre cumulatively, while the pump price cumulatively increased by $2.79 in an opposing trend. In other words, the oil companies have increased by $2.82 “more” per litre when adjusting the price upward. A similar case was observed in 2019, when the import price per litre cumulatively increased by $0.51 while the pump price increased by $2.30 cumulatively, indicating an additional increase of $1.79 by oil companies. On the other hand, “coming down less” occurred in 2018 and 2020 respectively. For instance in 2020, the import price per litre of petrol cumulatively dropped by $1.20, yet the pump price only saw a cumulative reduction of $0.10, indicating that the price “came down less” by $1.10 when oil companies adjusted the price.
- Increasing Conformity in Pump Price Among Oil Companies
100% Identical Prices for 6 Consecutive Months
The Council’s data analysis revealed an ever-increasing level of pump price conformity among the 5 oil companies over the course of 5.5 years. Apart from a 72.3% conformity (i.e. identical for 264 days) in 2018, the conformity rate was over 80% for all other years. In 2019, the number of days with identical pump prices increased by 14.5% year-on-year, reaching 86.8% (317 days) conformity, and further increased to 87.7% (321 days) in 2020. Though this conformity rate slightly eased in 2021 to 81.1% (296 days), it rebounded in 2022. It is worth noting from the fourth quarter of 2022 to the first quarter of 2023, the pump price of the 5 oil companies remained completely the same for more than 182 consecutive days. (Pump price remained the same from 28 September 2022 to 3 April 2023.)
The data also reflected that for both upward and downward adjustments, all 5 companies exhibited very similar patterns. In most cases, 2 oil companies were usually the first to adjust their pump prices, while the other oil companies generally responded quickly by adjusting their pump prices to the same level within several days. Competition among the oil companies was not apparent.
- Actual Expenditure Increased by Almost 40% Despite Higher Walk-in Discounts
During these 5.5 years, the walk-in discounts offered by the oil companies have shown an increase, from a range of $0.90 to $2.01 per litre in 2018 to $1.87 to $5.60 per litre in the first half of 2023. Two of the oil companies had a rising overall trend in the proportion of days with higher discounts as compared with before, increasing from 2% and 8% in 2018, to 29% and 28% in the first half of 2023 respectively.
Despite increased walk-in discounts offered by all 5 oil companies from 2018 onwards, when set against the widening gap between the pump price and import price, consumers are actually paying more and more for petrol. In the first half of 2023, the actual expenditure for each litre of petrol increased by 13.1% to 38.8% compared with 5.5 years prior. The Council has also observed that 3 oil companies consistently offered higher discounts on fixed days of a week, and the said days of each company would not overlap with each other, and they did not offer higher discounts on Sundays, giving consumers the impression of a consistent pattern.
- Oil Companies Awarded with More Petrol Filling Station Sites Offered Higher Walk-in Discounts
Apart from the product cost, petrol retail price could be affected by various factors, such as inflation, shipping costs, employee wages, tender award price of petrol filling station sites, etc. In particular, the tender award price of petrol filling station sites showed an increasing trend in recent years. The Council also observed that certain oil companies which had been awarded with more tenders of the petrol filling stations sites managed to offer higher walk-in discounts, indicating that there is no necessary correlation between the tender award prices for petrol filling station sites and the depth of discount offered.
Although the Council hopes to probe into the reasons behind the consistently high oil prices in Hong Kong, given the commercial sensitivity of the data, it is difficult for the Council to obtain and accurately analyse the changes in cost and the relevant pressure in the industry, so as to assess whether the widening gap is legitimate. The Council has long been advocating for more transparent disclosure of cost information by oil companies to facilitate market monitoring on their state of businesses.
Enhance Clarity of Offers and Information Transparency
Benefit Consumers with Direct Pump Price Reductions
Despite the various discounts and promotions offered to consumers by the oil companies, the Council noticed that the promotional tactics of some offers might be confusing for consumers. For example, the claimed discount per litre in fact included the equivalent value of the membership points to be earned, but such terms and conditions were displayed in miniscule font that was difficult to spot and could be easily overlooked by consumers. Furthermore, some petrol filling stations displayed multiple advertisement boards with offers of different types and under different applicable conditions together, which could easily confuse drivers. Even if consumers checked the oil price on the oil companies’ websites before purchase, the Council discovered unsatisfactory situation in information updates, such as delays in update of price information on the websites, making it difficult for consumers to obtain accurate information.
The Council once again calls upon oil companies to reduce the pump price directly, addressing consumer demand through pragmatic solutions and direct benefits. In addition, oil companies should provide simple, clear and straightforward discounts and promotional offers to consumers. They should also ensure such information is disclosed and updated on their websites, social media platforms and mobile applications in a clear and easy-to-understand way, and in a timely and synchronised manner, to allow consumers to receive the latest information. Consumers should also pay attention to different discounts/promotional offers and compare them carefully. They can make good use of the Council’s “Oil Price Watch” website for smart comparison before refilling their tanks.
Furthermore, the Council recommends the Government to explore ways to strengthen industry monitoring, such as exploring mandatory disclosure of price information by oil companies (e.g. incorporating relevant requirement in the land lease conditions of the petrol filling station sites). The Government could also consider introducing measures to govern the oil companies’ practices on disclosure of price and discount information, such as a clear standard to display promotional wordings and graphics, as well as requiring oil companies to synchronise the updating of relevant information across all their available publicity channels.
The Council opines that oil companies, as large corporations, should have the capacity to enhance information transparency by disclosing more cost and sales data, so as to alleviate long-standing public scepticism towards the industry. As auto-fuel price greatly impacts public livelihood and high auto-fuel price will further increase the burden on consumers, the Council anticipates firm measures by the Government and oil companies to step up the transparency of the local petrol market and pricing, which would allow greater public scrutiny on the market.
Visit https://www.consumer.org.hk/en/advocacy/study-report/autofuel_2023 to view the full electronic version of the “Auto-fuel Price Monitoring Analysis 2023” report.