Rising fuel prices in Hong Kong — among the highest in the world — are placing increasing pressure on motorists, particularly those in the commercial transport sector, prompting calls for measures to improve pricing transparency and stabilize costs.
Brent crude oil futures rose from around $70 per barrel in late February to over $100 per barrel in early April. By Monday, retail prices of diesel and premium gasoline in Hong Kong had jumped 47.5 percent and 51.8 percent respectively since Feb 28, when the United States and Israel launched airstrikes on Iran.
The experts pointed to the city’s notoriously opaque fuel market, which prevents prices from fully reflecting actual costs. This has left local consumers vulnerable, even before recent geopolitical tensions and supply disruptions drove oil costs higher.
A recent survey of nearly 700 motorists indicates that many commercial-vehicle drivers in Hong Kong — particularly those in the cargo sector — are struggling to stay afloat. Some have started to use less air conditioning, have skipped meals, and worked longer hours.
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Over 80 percent of the commercial drivers saw their monthly income plummet by more than HK$5,000 ($639), roughly a quarter of the city’s median monthly wage. About 83 percent said the mounting financial pressures were taking a toll on their physical and mental health.
“Drivers working for large companies feel the pinch less, but self-employed drivers and those working for online logistics platforms need to absorb the additional costs on their own,” said Michelle Tsang Wing-suet, chairwoman of the Talk To You Now People Livelihood Progress Group, which initiated the survey.
To offset rising costs, over 60 percent of surveyed drivers said they had increased their workload or extended working hours to earn more. About 80 percent chose to use less air conditioning, and Tsang added that some had even skipped breakfast to save money.
To help ease pressure on the transportation sector, the Hong Kong Special Administrative Region government announced on April 9 a relief package that includes a HK$3-per-liter diesel subsidy and halved government tunnel tolls for commercial vehicles.
“Although welcoming the reliefs, drivers thought their effects would be rather limited,” Tsang said. Many motorists had complained about the opaque pricing mechanisms employed by oil retailers and the lack of effective government oversight, she added.
Hong Kong’s fuel prices are among the highest globally, surpassing those in many developed economies such as Singapore, Denmark, and the Netherlands.
Pump prices across the city’s fuel providers are also strikingly similar. On Wednesday, four of Hong Kong’s five major retailers set their price for premium gasoline at HK$34.19, with all five retailers charging a uniform HK$36.17 per liter for diesel.
This pattern has long caused public suspicions of price-fixing within the market.
A 2017 report by the city’s Competition Commission found no direct evidence of price-fixing, but did identify a pattern of “parallel pricing” — in which companies adjust pump prices in near-unison. It also noted a complex, opaque discount system that makes it difficult for consumers to compare actual prices.
Prices across all gas stations owned by the same company are identical, with no geographical variation, the report found.
Similarly, a 2020 Consumer Council study observed that fuel prices have tended to rise quickly but fall slowly over the past seven years, except for 2014.
A 2020 Legislative Council report said previous studies by the Competition Commission and Consumer Council were stonewalled by a lack of access to crucial data, such as costs, profits and net margin of stakeholders, making it impossible to dispel consumer skepticism.
Oil companies routinely cite Hong Kong’s astronomical land and operating costs as justification for high fuel prices. However, Zhou Wen, associate professor at the University of Hong Kong Business School, said that such claims are not economically sound. Land prices are a fixed cost and should not influence a business’ optimal pricing.
Some stations were built decades ago, when land prices were much lower, yet their fuel isn’t cheaper today, he said. For example, the profit margin on gasoline — after deducting the fixed HK$6.06 tax and import costs — has soared sixfold over the past 20 years, from about HK$2 per liter to over HK$20 today, far outpacing inflation.
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“Given that the increase in retail price far exceeded the increase in costs, we can assume that the growth portion mainly goes to profits,” Zhou said.
He added that fuel is a highly standardized product, allowing companies to maintain similar prices without explicit collusion. Retailers offer diversified, case-by-case discounts to retain consumer loyalty, but overall prices remain nearly identical. If one company raises prices, others seamlessly follow suit, without the need for backroom collusion, he said.
Stanley Chiang Chi-wai, chairman of the Hong Kong Land Transport Council, said large corporate buyers can secure discounts of up to 70 percent on diesel.
“Oil companies still make a profit even with such significant discounts,” he said, “This indicates how wide the profit margins are on fuel.”
Zhou suggested that regulators conduct targeted interviews and apply public pressure to encourage oil companies to consider their reputation and compliance, prompting them to voluntarily reduce anti-competitive practices.
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Based on the survey results, Tsang’s group recommended several measures to increase pricing transparency and stabilize prices. They include a fare-adjustment mechanism for the logistics and transport sector — similar to those used in public transportation — linking fuel surcharges to inflation.
It also proposed a fuel-price stabilization fund, financed by per-liter contributions from traders and supplemented by government subsidies, to support consumers during sudden global oil shocks.
The Consumer Council urged retailers to consider consumers’ affordability and adopt responsible sales strategies, fulfilling their corporate social responsibilities.
Contact the writers at williamxu@chinadailyhk.com
