ICCC News

The Independent Consumer and Competition Commission (ICCC) is of the view that crude oil prices will continue to fluctuate in the remaining months of 2019 through to 2020 but gently towards a downward path.

Making reference to a short-term forecast from Oil Crude Price.Com, the ICCC stated that global crude oil price could average $64.93 per barrel in 2019 and $65.19 per barrel in 2020.

As crude oil is used to produce petrol, diesel and kerosene among other petroleum products, retail price movements for these petroleum products are mainly dictated by crude oil price movements. Crude oil price movements are mainly dictated by the following:

  • Demand for oil by the major oil consuming economies such as China, India, and the United States. When shale oil production is low, the US usually becomes a major oil consumer;
  • Supply of oil from the major oil producers such as the Organisation of Petroleum Exporting Countries (OPEC) and Russia and the US. US is leading shale oil producer and its shale oil stock also has a major impact on global oil prices; and
  • Geopolitical and trade issues have a major impact on global economic activities, thus they also have a major impact on oil prices. This is the case where geopolitical and trade issues affect the production, supply and trading of oil.

ICCC Commissioner and Chief Executive Officer, Paulus Ain added that Papua New Guinea does not have any influence in the international oil market and therefore, any developments in relation to the global supply and demand of oil will have an impact on the future oil prices and eventually on the movements of retail fuel prices in the country.

While the ICCC is responsible for setting the annual wholesale and retail margins, and the monthly fuel prices in the country, it does not have any control over several components that feed into the retail price build-up.”

These components that Commissioner Ain was referring to were;

  • Import Parity Prices (IPP) which is mainly influenced by the Mean of Platts Singapore (MOPS) prices for petrol, diesel and kerosene, and the PNG-kina US dollar exchange rate. The MOPS price movements are mainly influenced by international oil price movements. Nevertheless, the IPP usually accounts for 50-60 % of the monthly retail prices and is usually a pass through cost in the retail price build-up; and
  • The domestic road and sea freight rates are also pass through costs in the retail price build-up. For centres like Kavieng, the total freight can be as high as 30% of the final retail price.

Commissioner Ain explained that the OPEC bloc have long dictated global crude oil prices, while the US emerged over time as a significant producer of shale oil but recent years, oil production from the US has risen sharply, surpassing Russia and all other oil producing countries.

“In May 2018, the United States pulled out of the 2015 Iran Nuclear Deal, subsequently targeting Iran with economic sanctions that affected the country’s energy sector, and further restrained other countries from trading with it. By October, the US granted waivers to eight countries to resume import of Iranian oil but then, Iraq already had a huge stockpile of oil inventory.”

“These political measures pushed up crude oil prices to a peak of $82 per barrel in September 2018; as OPEC countries and Russia continued producing high volumes. By October 2018, the global oil market was saturated with excess supply, mostly from Iran and the US. The supply glut caused a dip in crude oil prices in the last quarter of 2018, forcing prices to fall significantly, from an average high of $82 per barrel in October down to $50 per barrel in December.”

“To drive up oil prices, OPEC and Russia (OPEC+) made an agreement in January 2019 for member countries to reduce crude oil production to 1.2 million barrels per day (bpd) through to June.”

“The OPEC-backed supply cuts have led to price increases in the early months of 2019, and markets have been further tightened by US sanctions against oil exports from Venezuela. However, the strong responsiveness of shale oil from US to patch up the supply gap apparently has kept global prices within a narrower band than has historically been the case.”

Commissioner Ain added that currently the OPEC-led bloc look set to continue supporting prices with ongoing production cuts, instead of fighting for market share, which would practically give more incentives to US shale producers to counter OPEC-led production cuts by setting higher production records, which would ultimately compel the alliance to reconsider their position on supply cuts, as most of their own members also have higher reserves of supplies building up.

“Due to volatility in the oil market, it is difficult to precisely forecast the retail fuel price movements.”

“However, based on the short term projections in oil price movements as provided above, the ICCC is of the view that crude oil prices will continue to fluctuate in the remaining months of 2019 through to 2020 but gently towards a downward path.”

Commissioner Ain added that these price movements will mainly depend on the on-going geo-political tensions between U.S and oil producing economic countries, the demand and supply of oil, and the other aforementioned factors.

The Independent Consumer and Competition Commission (“ICCC”) has proposed to grant authorization to PNG Air Limited (PNG Air) to give effect to a code-share agreement it has entered into with Virgin Australia for services between Port Moresby, PNG, and Brisbane, Australia.

Commissioner and Chief Executive Officer, Mr. Paulus Ain said, “Whilst acknowledging that free sale code-share arrangement is not very competitive, the arrangement will allow a new marketing carrier to enter the market. The ICCC considers that in the present circumstances, it is better to have PNG Air start with the free sale arrangement.”

The ICCC has considered that the following public benefits that are likely to result if the parties provide the code-share services:

  • Travelers’ choice of marketing carriers would be increased (from three (3) to four (4) as currently there are 3 airlines operating on this route, being Qantas, Air Nuigini and Virgin Australia);
  • As a result of increased competition, travelers’ would benefit from competitive airfares and more frequent passenger air services between PNG and Australia; 
  • Direct connections and ease of luggage transfers for PNG Air’s domestic services;
  • Further development of the route and making Port Moresby as a transit hub as passengers from other Pacific nations such as Federated States of Micronesia use Port Moresby as a transit hub to travel to Australia; 
  • The possibility of other airlines entering the market as independently operators or by code-sharing as a result of aggressive competition on this route by the 4 airlines; leading to further route development in the long run;
  • The code-share arrangement has the potential of increasing competition between Air Niugini and PNG Air in the domestic market and would lead to beneficial effects such as reduced airfares and better services for domestic services; and
  • This would increase traffic volume through Port Moresby, making it possible for more frequent services. This outcome would also lead to competitive and special fares in the long run as a result of increased passenger volumes.

On the other hand, the ICCC noted that the following public detriments are likely to result; however, these are outweighed by the mentioned public benefits:

  • Infrastructural barriers such as the availability of slots at the Port Moresby Jackson’s International airport. The ICCC considers that despite the recent redevelopment at the Jackson’s Airport, there was no evidence which suggested that slot availability was increased. Should demand grow for passenger and freight services for the international flights, new carriers may also enter the market and provide air transport services. The unavailability of slots would hinder the entrance of the airliners. This would prevent potential competition on the incumbents.
  • Regulatory requirements such as airline designation and capacity requirements as per bilateral agreements between PNG and Australia can prove at times, to be a barrier to entry. Before an airline could operate international services to another country, the government must first negotiate a treaty level agreement with the destination country’s government. PNG has a bilateral Air Service Agreement (ASA) with Australia. Under the ASA, requirements such as traffic rights, capacity, designation, ownership and control, other policy, safety and security clauses would be included. Such regulatory requirements can act as a barrier to entry and hinder effective competition.

The Independent Consumer and Competition Commission (“ICCC) will commence an independent investigation into the acquisition of Bank South Pacific Capital Limited’s (“BSP Capital”) 62.5 percent shareholding in the Port Moresby Stock Exchange by Pacific Capital Markets Development Pty Ltd (“Pacific Capital”). BSP Capital is a subsidiary of Bank South Pacific Limited (“BSP”).

The ICCC was advised by BSP on the 30th November 2018, after concluding the transaction with Pacific Capital. Whilst they (BSP and Pacific Capital) may have complied with other relevant legislations and regulatory processes, it is indeed equally important for both parties to seek the ICCC’s clearance or authorisation on the acquisition. 

ICCC Commissioner and CEO, Mr Paulus Ain said it is important for businesses to apply for Clearance or Authorisation from the ICCC to safeguard the concerned parties from potential legal action from the ICCC or any aggrieved third parties under the Independent Consumer and Competition Act 2002 (ICCC Act).

“I am really concerned that the parties have decided not to seek a clearance or authorisation from the ICCC knowing very well the requirements under the ICCC Act.”

“As a party to the transaction BSP is fully aware, under the previous arrangement, the ICCC administered a voluntary merger notification regime under the ICCC Act where businesses were not required to apply for Clearance or Authorisation for any proposed merger or acquisition.” Mr. Ain said.

“However, on the 25th July, 2018, the ICCC Act was amended by Parliament making it mandatory for parties to a merger or an acquisition to give notice seeking a clearance from the ICCC if the merger or acquisition fell within certain thresholds.”

These thresholds are: (1) that the transaction value of the merger or acquisition exceeds K50 million; or (2) that that the merger or acquisition is likely, or would be likely, to result in a market share increase of 50 percent or more, of the person who is acquiring.

According to Mr Ain, the acquisition would effectively result in Pacific Capital acquiring 62.5% (percent) percent of the market share within the Port Moresby Stock Exchange. This is well within the thresholds for giving a notice and seeking clearance from the ICCC.

Mr Ain, however, explained that the acquisition is not subject to the new thresholds because the new amended ICCC Act is still yet to be gazetted by the Governor-General.

 

“Once the new amendments are gazetted, the date of effect will be made retrospective to 24th November 2018 as requested by Government. However, it is likely that the date of effect could be the date of gazettal. Therefore, in order to safe guard businesses from the retrospective effective date of the new amendments, businesses are advised to consult the ICCC prior to completing any merger or acquisition.”

“For failure to give notice to seek clearance from the ICCC will result in an automatic fine of K750, 000.00 per the new amendments once gazetted. Thus, in the interim and to safeguard businesses from this potential effect, they should apply to the ICCC for a Clearance or Authorisation. All business houses in PNG are fully aware of the newly amended provisions of the ICCC Act, including BSP, as most of them have fully participated during the consultation process.”

Mr Ain reiterated that since the amendments were passed by Parliament on 25th of July this year, the ICCC has undertaken extensive awareness as well as consultation with the general public and businesses of the effects of these legislative changes.

“The new amendments apply to all sectors and industries of PNG’s economy. As a result, we have been advising law firms and other State regulators, to inform their clients to come to the ICCC first if they are in the process of completing a merger or acquisition. If businesses are uncertain about the competition law requirements of the ICCC Act, then they should consult the ICCC.”

Mr Ain further stated that the ICCC reserves its rights under the ICCC Act to investigate any consummated acquisitions and take legal action if it is satisfied that the acquisition would have the effect of substantially lessening competition in a market in PNG.

The Independent Consumer and Competition Commission (“ICCC”) hereby announces the new retail fuel prices for this month, which will take effect on Tuesday, 08th January, 2019 (January).

According to the ICCC’s calculations, retail prices for petrol, diesel and kerosene will all decrease throughout PNG as of 08th January. The decrease in the retail prices for the three petroleum products is mainly attributed to the decrease in the Import Parity Prices (IPP) for January, and the decrease in the domestic sea freight rates for the first quarter of 2019. The price decrease in the IPP is attributed to the decrease in the Singapore prices for December, 2018 (December) as a result of  the decrease in the crude oil prices as represented by Dated Brent.

However, the extent of the fuel price decrease at the IPP level has been abated by the increase in the international sea freight and the depreciation of the PNG kina against the US dollar during the month of December. Consequently, this price decrease has mainly been attributed to rising US oil inventories.

The domestic retail fuel prices for petrol, diesel and kerosene are inclusive of the IPPs, domestic sea and road freight rates for the first quarter of 2019, the 2019 wholesale and retail margins for petrol, diesel and kerosene; including excise duty for petrol and diesel, and the Goods and Services Tax (GST).

PORT MORESBY

As a result of adding all the various cost components mentioned above, the maximum retail prices for fuel in Port Moresby are as follows:

Port Moresby Retail Prices (toea per litre)

 

Petrol (tpl)

Diesel (tpl)

Kerosene (tpl)

Retail Prices as of 8th January, 2019

      320.51

      303.84

280.36

Retail Prices as of 8th December, 2018

 339.24

331.58

305.92

Price Variance (+/-) toea per litre

-18.73

-27.73

-25.56

 

Retail prices in all other designated centres will change according to their approved in-country shipping and road freight rates (for the first quarter of 2019) that are charged by the fuel wholesalers.

ALL CENTRES

For all centers, the maximum retail fuel prices for each petroleum product in the country will change on average as follows:

  • Petrol prices will decrease by 22.01 toea per litre;
  • Diesel prices will decrease by 31.61 toea per litre; and
  • Kerosene prices will decrease by 29.25 toea per litre.

As part of the ICCC’s enforcement and compliance of fuel prices, its Investigation Officers will conduct inspections at all service stations to ensure prices of petroleum products do not exceed the allowable maximum prices. The following ICCC officers will conduct compliance inspections in Lae, Goroka, Kokopo and Port Moresby. Inspections in other provinces will be supported by our contacts in those provinces. Please note:

  • Mr. Christopher Gabesoa, Mr. Seri Tau Vali, Mr. Dennis Jerry and Mr. Bill Boiu will conduct compliance inspections to all service stations in the National Capital District. They can be reached on telephone number 325 2144;
  • Ms. Pamela Ipambonj and Mr. Timothy Ponau will conduct compliance inspections in Lae. They can be reached on telephone number 472 2859;
  • Mr. Bobby Tei, Roman Rosting and Mrs. Dorcas Baining Julai will conduct compliance inspections in Kokopo, Rabaul, Kerevat, Warangoi and Toma. They can be reached on telephone number 982 9711; and
  • Mr. Kevin Kondo and Mr. Jeffery Khar will conduct compliance inspections in Goroka, Kainantu, Kundiawa and Mt. Hagen. They can be reached on, following mobile numbers 7369 8251/ 7232 4861.

The prices set by the ICCC are the indicative maximum retail prices, for which retailers may choose to sell below the maximum price. The ICCC would like to remind retailers who sell fuel-using pumps to set fuel prices to one decimal place while the ICCC will continue to set the maximum price to 2 decimal places.

No fuel pump operator should charge above the Indicative Retail Price for this month’s price regardless of the number of decimals. This is to ensure compliance with the Prices Regulation Act under which the maximum prices of refined petroleum products are set. Retailers who are displaying prices to 1 decimal place are urged by the ICCC to round the prices down to ensure prices are within the allowable indicative retail prices. The ICCC Inspectors will continue to conduct spot checks after 08th January, 2019, to ensure on-going compliance by fuel operators.

Consumers are advised to report any instances of overcharging by retailers through the ICCC’s Consumer Protection Division on 325 2144, on toll free number: 180 3333 or by contacting our Regional Offices closest to you on the numbers provided above.

The Independent Consumer and Competition Commission (“ICCC”) hereby announces the new retail fuel prices for this month, which will take effect on Saturday, 08th December, 2018 (December).

According to the ICCC’s calculations, retail prices for petrol, diesel and kerosene will all decrease on average throughout PNG as of 08th December. The decrease in the retail prices for the three petroleum products is mainly attributed to the decrease in the Import Parity Prices (IPP) for December. This price decrease in the IPP has mainly been attributed to the decrease in the crude oil prices for November, 2018 (November) as represented by Dated Brent. However, the extent of the price decrease at the IPP level has been lessened by the increase in the international sea freight and the depreciation of the PNG kina against the US dollar during the month of November.

Moreover, the average crude oil price decrease in November was mainly attributed to increased global crude oil supplies from Iran and Saudi Arabia.  Crude oil supplies from Iran has been increasing after the US decided to grant waivers on some of its sanctions previously imposed on Iran.  The granting of these waivers allowed South Korea, Japan, India, China, Turkey, Taiwan, Italy and Greece to continue importing oil from Iran for the next six months. Saudi Arabia had ramped up its oil production after the sanctions were imposed by the US. With more oil still on the market, Saudi Arabia was caught off guard by the lifting of sanctions by the US.

The domestic retail fuel prices for petrol, diesel and kerosene are inclusive of the IPPs, domestic sea and road freight rates for the last quarter of 2018, the 2018 wholesale and retail margins for petrol, diesel and kerosene; including excise duty for petrol and diesel, and the Goods and Services Tax (GST).

PORT MORESBY

As a result of adding all the various cost components mentioned above, the maximum retail prices for fuel in Port Moresby are as follows:

Port Moresby Retail Prices (toea per litre)

 

Petrol (tpl)

Diesel (tpl)

Kerosene (tpl)

Retail Prices as of 8th December, 2018

      339.24

      331.58

305.92

Retail Prices as of 8th November, 2018

 383.43

364.74

334.19

Price Variance (+/-) toea per litre

-44.18

-33.16

-28.27

Retail prices in all other designated centres will change according to their approved in-country shipping and road freight rates (for the last quarter of 2018) that are charged by the fuel wholesalers.

 

ALL CENTRES

For all centers, the maximum retail fuel prices for each petroleum product in the country will change on average as follows:

  • Petrol prices will decrease by 44.19 toea per litre;
  • Diesel prices will decrease by 33.16 toea per litre; and
  • Kerosene prices will decrease by 28.27 toea per litre.

As part of the ICCC’s enforcement and compliance of fuel prices, its Investigation Officers will conduct inspections at all service stations to ensure prices of petroleum products do not exceed the allowable maximum prices. The following ICCC officers will conduct compliance inspections in Lae, Goroka, Kokopo and Port Moresby. Inspections in other provinces will be supported by our contacts in those provinces. Please note:

  • Mr. Christopher Gabesoa, Mr. Seri Tau Vali, Mr. Dennis Jerry and Mr. Bill Boiu will conduct compliance inspections to all service stations in the National Capital District. They can be reached on telephone number 325 2144;
  • Ms. Pamela Ipambonj and Mr. Timothy Ponau will conduct compliance inspections in Lae. They can be reached on telephone number 472 2859;
  • Mr. Bobby Tei, Roman Rosting and Mrs. Dorcas Baining Julai will conduct compliance inspections in Kokopo, Rabaul, Kerevat, Warangoi and Toma. They can be reached on telephone number 982 9711; and
  • Mr. Kevin Kondo and Mr. Jeffery Khar will conduct compliance inspections in Goroka, Kainantu, Kundiawa and Mt. Hagen. They can be reached on telephone number 532 1077.

The prices set by the ICCC are the indicative maximum retail prices, for which retailers may choose to sell below the maximum price. The ICCC would like to remind retailers who sell fuel-using pumps to set fuel prices to one decimal place while the ICCC will continue to set the maximum price to 2 decimal places.

No fuel pump operator should charge above the Indicative Retail Price for this month’s price regardless of the number of decimals. This is to ensure compliance with the Prices Regulation Act under which the maximum prices of refined petroleum products are set. Retailers who are displaying prices to 1 decimal place are urged by the ICCC to round the prices down to ensure prices are within the allowable indicative retail prices. The ICCC Inspectors will continue to conduct spot checks after 08th December, 2018, to ensure on-going compliance by fuel operators.

Consumers are advised to report any instances of overcharging by retailers through the ICCC’s Consumer Protection Division on 325 2144, on toll free number: 180 3333 or by contacting our Regional Offices closest to you on the numbers provided above.