If oil keeps rising we all pay, or change our ways
Updated on Jun 19, 2008
A sustained surge in world oil prices eventually hits everyone in the pocket. But some social good can result from dearer oil, such as a conscious effort to avoid waste of a finite resource and the benefit that that can have for the environment. People make choices they previously resisted, such as buying smaller vehicles that emit less pollutants, using public transport and travelling less.
However, Hong Kong’s truck, van and minibus drivers, who are spending thousands of dollars a month more on fuel than previously, can do none of these things to relieve this burden. They also lack the bargaining power to pass it on down the supply chain, and no one is suggesting the consumer should pay.
As a result, their leaders have mounted a sustained public campaign to force the government to cut diesel taxes, marked by a demonstration in which heavy vehicles brought traffic in Central to a standstill. As we report today, it appears to have worked, with the government likely to waive the duty of HK 56 cents a litre on Euro V diesel. The tax was cut by half six months ago as an incentive for drivers to switch to using it.
The government spends billions on incentives and tax concessions for the use of less-polluting vehicles and cleaner fuel. For example, the existing duty on Euro V diesel of less than 5 per cent of the retail price is one of the lowest in the world.
Setting it at that level, in a city where diesel prices are low by world standards, was an attempt to encourage people to switch from dirtier fuels to Euro V diesel without making it so inexpensive as to lead to wasteful usage. If the government can be pressured into detouring from this socially responsible approach, it will be evidence of the political volatility that rises in fuel prices can induce. Financial Secretary John Tsang Chun-wah is right to have said the issue is complicated. But it is questionable whether a waiver is good public policy.
It has been suggested a waiver would be temporary, lasting perhaps two or three months. Hopefully, oil prices will eventually drop, relieving pressure on the drivers. But few industry observers can see an end to the spiral. What will the government do if the price of crude oil continues to head towards US$200 a barrel, as some predict, thereby negating the benefit of a duty waiver? Officials will be under pressure to introduce other measures.
There is every reason to believe high oil prices are here to stay. The increase in demand, led by the mainland and India, coupled with lagging exploration and exploitation of remaining reserves, has changed the equation. Alternative energy sources and technologies are a long way from making a real difference.
The rising cost of fuel does not mean that fuel taxes should be scrapped. They help ration, by price, the source of vehicle emissions which contribute to air pollution and global warming. Consumers then use fuel less wastefully. This is not the time to be talking about getting rid of such a tax. A call by a spokesman for drivers to scrap the diesel tax altogether is out of the question because it would encourage the use of more polluting fuel.
The government appears to be ready to give a measure of relief to a hard-pressed sector. However, unless the oil price retreats soon, waiving duty will be only a short-term palliative. Sooner or later, consumers must foot the bill for rising fuel costs or change their consumption habits. But first, a way must be found for transport operators to pass them on.