Prices of petroleum products are skyrocketing by the day and their ramifications on the economy are evident in the astronomical price hikes in goods and services.
Ghana practices a deregulation policy, meaning changes in prices on the world market have a direct impact on prices at the pumps.
That notwithstanding, several variables determine the final price build-up, some of which are beyond the control of the National Petroleum Authority (NPA), the regulator, importers and the Oil Marketing Companies (OMCs).
The variables include the world market price, as a huge chunk of all petroleum products in the country are imported.
At the time of putting this piece together, the West Texas Intermediate (WTI) crude oil price for November 2, 2022 was $88.10 per barrel. The effect is that all the costs incurred by the importer, such as shipping, landing and discharge are added to the world price, before it is sold to the OMCs locally.
Another determining factor in the final price build-up is the depreciation of the local currency, in this case, the Ghana cedis. This means the performance of the cedi against the dollar is a determining factor.
For instance, if the OMCs purchased a litre of fuel at $1, under the current exchange rate, the same quantity of fuel would be sold for ₡13.
The government has also imposed about 12 different taxes and levies on petroleum products, including the Sanitation and Pollution Levy and the Energy Debt Recovery Levy.
We have monitored public debates on the petroleum prices over the last few weeks and have observed that the industry players know of the challenges and how to arrest them.
On an Accra-based Asempa FM programme yesterday, the president of the Oil Marketing Companies (OMCs, Patrick Ofori lamented the cost of purchasing dollars with cedis to import crude oil.
He indicated that though the government gives some forex, it was not enough to import adequate products and as such the OMCs go the extra mile to find more forex to top up, as failure may result in shortage of the product.
Due to that, they have to sell at prices that would give them the returns they need to pay their banks. He said that sometimes they even have to resort to the black market for dollars.
Meanwhile, the Forex Bureau Association of Ghana and the Chamber of Petroleum Consumers (COPEC) are singing the same song.
In an interview on the same radio programme, the Executive Secretary of COPEC, Duncan Amoah, made an advocacy. He said that the government should guarantee a fixed exchange rate for petroleum products, for a quarter of a year, and immediately the prices of petroleum products would reduce.
According to him, importers of petroleum products cannot compete for dollars with importers of cow feet, tiles or clothes, as the former’s impact on the economy far outweighs the rest.
At a meeting with the president at Jubilee House, ahead of his address to the nation last Sunday, the president of the Forex Bureau Association of Ghana, K.T. Dadzie, suggested to the government to look at which sector of the economy consumes more forex and inject enough.
He argued that the importers of petroleum products use more dollars and should be considered first, as their industry holds the entire value chain of the economy.
We agree with the arguments mounted by the Forex Bureau Association of Ghana and the COPEC. They are the experts in the petroleum and forex markets and understand the nitty-gritty of the pricing.
Their advocacy, we believe effectively responds to the concerns raised by the president of the OMCs, so we will suggest that the government put measures in place to deal with this issue and help reduce the price of petroleum products.
In the end, it is the ordinary consumer who suffers the brunt of the hikes in prices, as has been witnessed in the country lately.
We agree that the economy is in crisis, but we believe that if the government moves to guarantee for the OMCs for a longer period as suggested by COPEC, it may encourage the OMCs to sell their products at fixed and reasonable prices to the consumers.
