Harbour View: Consumer Council taking another futile run at gas stations

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“Well, nothing’s dead down here, it’s just a little tired”
Gordon Downie

Poet Gordon Downie could have been talking about bad ideas in Hong Kong. The kind of thinking that saw the creation of the Competition Commission is back, probably for lack of feasible targets. Real monopolies and cartels in Hong Kong are heavily government protected and promoted and exempted from consideration by the new antitrust laws. So old targets keep coming back.

This time: Gas stations. The 2005 report commissioned by the CEBD put this to rest for a while. Not dead – just a little tired. Consumer Council (CC) is back with a case of amnesia, reviving old arguments they forgot were shot down years ago. This chart from the 2005 report tells the story:

gas chart 2005

A beer that costs you $9 in Wellcome costs you $60 in Lan Kwai Fong for a reason. You aren’t paying for barley and water. Likewise you can see here that the ‘Product Cost’ – which includes cost of oil, marketing, distribution, staff, IT plus plus plus is small compared to taxes and land, i.e. government controlled factors.

The current CC whinge is that when the price of oil goes up, prices come up quickly (in 4 days), but when it comes down, it takes longer. I’m surprised they come down at all. Show me a business that doesn’t crank up prices at the slightest excuse (consumer perception of increased product cost) and resists lowering them. The CC worries about the firms ‘reaping huge profits’, which, frankly, isn’t the case and is none of their business. If rich people (car owners) and businesses want to buy gas and the gas stations profit, why does Consumer Council care?

In any event, if you want to know who is reaping huge profits, look at the above. The government,who funds the CC, is the biggest part of that bar. The industry cost is the government’s revenue at an almost 100% margin.

If the Consumer Council is anti-profit, they are way outside of their mandate to monitor products for safety and quality. If they are about safety, they have no issue here. If they are about consumers paying too much, their target should be the government.

But since they won’t bite the hand that feeds them (always hungry for budget), they should just drop the tired old case against gas stations related to the cost of oil. There are a range of regulatory issues that bar new entrants, but that is story for another day.

Let this bad idea finally die.