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I refer to the letter, “HK petrol prices rise despite oil markets starting to moderate” (April 18). I share the frustration expressed about sticky prices, but the government’s options are constrained by market realities. The difference between the prices of crude oil and refined products is made up of the refining margin (the value added by refining), cost of distribution and marketing, transport, insurance, storage, taxes and the retailer’s mark-up. In the case of Hong Kong, because operators of gasoline stations paid a premium for the land, the price of land is factored into the price of fuel at the pump.

The Hong Kong government imposes a range of excise duties on hydrocarbon oils, from zero on Euro V diesel to HK$6.06 per litre on unleaded petrol. The government has chosen not to suspend the excise duty on petrol. This might encourage greater use of public transport and a speedier green transition.

Many public transport operators – buses, minibuses and ferries – rely heavily on diesel. The government has announced a two-month HK$3 per litre of diesel subsidy and a 50 per cent reduction in tunnel tolls for commercial vehicles. The two-month relief may not be adequate if conflict over the reopening of the Strait of Hormuz remains unresolved. Moreover, even if a deal could be hashed out between the United States and Iran, it is unlikely that passage through the strait would return to its previous toll-free and conflict-free state.

Questions have been asked about whether price caps could be imposed on refined products sold in Hong Kong. As Hong Kong has neither crude oil production nor refineries, the city has to buy from the international markets. The international price of diesel is based on the Mean of Platts Singapore (MOPS), a formula for pricing energy products developed by S&P Global.

As interference in the international markets is a non-starter, the government could reduce or stabilise the prices of refined products only through providing subsidies. For prudent financial reasons, this option was not accepted by the Hong Kong government in response to the oil price shocks of the 1970s and early 1980s. Supply shortage was the main concern and conservation was advocated. If the energy crisis triggered by the US-Israel war on Iran drags on, the government might have to advocate for greater conservation.

Regina Ip, chairwoman, New People’s Party