[2024 Hong Kong Fuel Prices] Analyzing the Reasons Behind Hong Kong’s World-Highest Fuel Costs

As of the end of August 2024, the price of gasoline in Hong Kong is US$3.273 per liter (approximately HK$25.53), representing a 7.63% increase from last year’s US$3.04 (approximately HK$23.72). The city with the second-highest fuel price, Monaco, charges US$2.371 per liter (approximately HK$18.5), which is 27.53% lower than Hong Kong’s price.

There is a common perception that Hong Kong’s gasoline prices rise faster than they fall. However, a 2020 report by the Consumer Council stated: “From January to April 2020, Hong Kong’s oil companies adjusted gasoline prices 11–13 times. Starting in March, as international oil prices experienced significant fluctuations, the frequency of adjustments increased, occurring 7–9 times. This suggests no evidence of gasoline prices are on a growing trend with minimal fluctuations.

However, the Consumer Council also pointed out that between 2013 and Q1 2020, when comparing the cumulative price changes of gasoline and Brent crude oil over seven years, retail gasoline prices fell by HK$2.4 less during decreases and rose by HK$1.99 more during increases than expected.

Since Hong Kong lacks oil refineries, all gasoline is imported from Singapore as refined oil products. These products are transported to Hong Kong via oil tankers and stored in Tsing Yi’s oil depots. Compared to land transportation, shipping costs are higher. Additionally, oil depot rents in Hong Kong are expensive, and only four companies import gasoline from Singapore: Shell, Caltex, Sinopec, and Esso. Companies like PetroChina and FEOSO purchase refined gasoline from these four suppliers.

Furthermore, Hong Kong’s high land prices significantly impact costs. Oil companies must purchase land to build gas stations, but after paying high land premiums, they are only granted 21 years of usage rights, which indirectly drives up costs.

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Between 1999 and 2024, Hong Kong’s retail gasoline price surged from approximately HK$10.13 to HK$23.5, while the cost price rose from HK$1.19 to HK$5.36. With the government imposing a HK$6.06 fuel tax since 1999, oil companies’ gross profit margins increased from HK$2.88 to HK$12.1. This means international oil price fluctuations only impact a portion of oil costs, with limited influence on overall retail prices. Of course, oil companies also face rising expenses such as rent, wages, and miscellaneous costs.

Currently, Hong Kong only supplies three types of fuel: 98 RON Standard Unleaded Gasoline, 98 RON Premium Unleaded Gasoline, and diesel. Cheaper 92 RON and 95 RON gasoline options are unavailable.

Former Competition Commission chairman Wu Hung-yuk Anna criticized the government for rejecting the reintroduction of 95 RON gasoline, which could serve as a more affordable alternative for consumers. Reports from other countries show that over 50% of drivers opt for 95 RON gasoline, which is approximately 15% cheaper than 98 RON gasoline.

Although 95 RON gasoline was sold alongside 98 RON gasoline in Hong Kong in 1991, it was discontinued within a year due to low sales. Retailers claimed their decision to sell only 98 RON gasoline reflected customer preferences, while the government defended its non-intervention stance, citing “free-market operations.”

Analyses have pointed out that neither the Competition Commission nor the Consumer Council has found evidence of price collusion among the four oil companies (e.g., one company adjusts prices, and others follow within a day or two). Instead, this phenomenon is referred to as “parallel pricing.”

Oil companies offer various discounts, such as fuel cards, fleet cards, and time-limited promotions, resulting in different final prices for consumers. However, the trend of “high increases, small decreases” and “going up fast, coming down slow” is apparent. Despite structural issues in Hong Kong’s gasoline market, the government has yet to implement policies to regulate oil companies’ profit models.