Advisory committee urgently needed to investigate gas prices hikes

Commentator Sulu Sou and lawmaker Ron Lam have once again called for the government to establish a legally-required advisory committee so that the Consumer Council (CC) can launch investigations on the structure of local gas prices.

Vehicle gas prices, for example, have seen steady rises over the past year on the retail end. It must be emphasized that the government has not levied any retail tax on the commodity for the past decade.

Ron Lam commented that the retail prices for vehicle gasoline in Hong Kong are much higher than in Macau, but government of the neighboring region is levying a retail tax of about HKD6 per liter.

Although supply of petroleum remains tight, prices are still projected to fall amidst worries about stagflation in developed economies and a global economic recession.

Bracing for a potentially worsening market, investors have continued to divest themselves of the resource to prepare for a forecasted sharp drop in demand, which subsequently led to the international petroleum prices hitting a record low in a week last week since April 1 this year.

For example, New York petroleum prices fell by 9.74%, and Brent oil prices fell by 8.70%. International petroleum prices have already fallen to the level they stood at the beginning of February this year, that is, before the Russia’s full-scale invasion of Ukraine.

Despite the international price plummet and continued falls since June this year, according to survey data released yesterday by the CC, 80% of local fuel stations have raised retail prices. For regular unleaded fuel, all except Nam Kwong Fuel have hiked the prices to 2.8%, equating to a MOP0.4 rise.

Nam Kwong made a price change yesterday, putting the price down 0.7% from MOP14.28 per liter to MOP14.18. The last occasion on which the other four brands changed prices was June this year.

As for premium unleaded fuel products, both Esso and Shell hiked the prices for 2.5%, from MOP15.79 per liter to MOP16.19. The two companies, which are the only sellers of premium fuel products in city, made the price changes in June.

Given the discrepancy in the local market, both Lam and former lawmaker – now commentator – Sulu Sou are once again urging the government to inaugurate the aforementioned advisory committee for the CC.

The main reason for the demand comes from the promulgation of the Consumer Rights Protection Law early this year. Before instigating any investigations on private business practices, the CC must seek advice from the committee. However, eight months after the enactment of the law, the committee has not yet been established.

In many of their commentaries and enquiries, the duo has emphasized that the CC should be able to investigate, as the law empowers it to, the price structure of local fuel prices, including (but not limited to) vehicle gasoline prices.

Sou pointed out, for example, that gas prices on the upstream and at the retail end are assessable by the public, given the publication of the data by the Economic and Technological Development Bureau (DSEDT). “However, we are uncertain about the costs at mid-levels,” the former lawmaker added.

In addition, both find the situation of delaying the inauguration of the aforementioned committee unacceptable. Sou even questioned why the government does not use the tool when it is so eminently useful.

He suspects, meanwhile, that the government does not want to admit that fuel prices in Macau are either unreasonably high or experiencing fluctuations, which are key factors for triggering investigations.

At the same time, both pointed to the operations of the fuel storages as the probable reason for price hikes and weakened competition.

Lam revealed that the midway storage in Ilha Verde, although owned by the government, actually has its usage rights equally distributed among five fuel brands in Macau. Other smaller dealers are required to lease rights from one of these brands.

The logical development of such mechanism is that smaller dealers will not be able to sell the commodity at a lower price than the five major brands.

On the other hand, Sou pointed out that the main fuel storage in Ka-Ho, although owned by the government, is managed under commission by Nam Kwong, which is among the five major fuel brands in Macau and is in direct competition with the other four brands that need to use the main storage.

Besides this, Lam considered the mode of concession requires a review. He revealed that land designated for gas stations will technically be so indefinitely. Concessions are automatically renewed.

By contrast, he suggests in the future, concessions should be relicensed or retendered near their respective expiration dates in the hope of encouraging more competitive pricing.

Furthermore, he also suggests that when new gas stations are being established on the New Urban Zones, the tenders should require operators to introduce gas products with lower octane levels to the market.

Currently, the city is seeing such products with an octane value of around 97 to 98, which is generally considered to be higher than needed for most everyday vehicles. Some comments suggest that products with an octane value of 95 are suitable. Products with lower octane values are cheaper than their higher-value counterparts.

The lawmaker said that the lower prices will help attract drivers to new gas stations set up at the New Urban Zones, which will help compensate for the less satisfactory business environments, such as low pedestrian traffic in these zones during their early development.

He also revealed that many residential gas pipelines are operated under contracts – in many cases of long duration – by gas product suppliers, which will also leave residents with no other option than to tolerate high prices.