Mixed reactions to the 15 per cent reduction in the prices of fuel products has deepened concerns about the manner in which the deregulation of Ghana’s petroleum sector is being carried out.
The recent reduction was triggered by the appreciation of the cedi against the dollar and other major trading currencies, but expectations were in favour of a higher reduction.
Consequently, some energy experts and civil society organisations have threatened legal action to compel the Oil Marketing Companies (OMCs) to reduce their prices further.
Expectations of a further reduction appear to be justified in the light of the fact that the Bulk Distribution Companies (BDCs) have communicated a reduction in petrol price by 23 per cent and diesel by 27 per cent.
Per the new prices, petrol is now being sold between GH¢15.00 and GH¢16.00 per gallon down from the GH¢18.00. Some fuel stations are now selling diesel at GH¢15 per gallon from GH¢18.
Based on these price disparities, the OMCs have been accused of abusing the market and exploiting consumers.
“We have evidence to show that the prices announced by the OMCs do not reflect the market forces as demonstrated by the indicators that affect the pricing of the products,” energy Think-Tank, the Africa Centre for Energy Policy (ACEP) pointed out last week.
According to ACEP, the indicative maximum ex-pump prices of petrol and diesel for the current price window should have been GHp329.81 per Litre for Petrol and GHp293.28 per litre for diesel.
“Contrary to these, the OMCs announced various prices which are completely at variance with the actual indicative prices at the pump,” the Think-Tank said in its statement.
But industry Co-ordinator for the OMCs Kwaku Agyemang Duah said it is not possible for the OMCs to reduce fuel prices by 23 percent due to taxes and other charges.
“The price component includes taxes, levies and ex-pump pricing. If we reduce fuel further down, we the OMCs lose”, he mentioned on the TV3’s Energy Beat programme.
Mr Agyemang Duah said the key issue is about negotiation, adding “we are in the second window of the deregulation. We assure consumers that fuel prices will go down further if all things become possible.”
The deregulation of the downstream sector which commenced in June this year triggered confusion in the market when it came with a 4 per cent increase in fuel prices with the exception of Premix fuel and residual fuel oil.
The price hike was influenced by rising prices of petroleum products on the world market and the cedi's depreciation against the dollar and other major trading currencies.
Former Chief Executive Officer of the National Petroleum Authority (NPA), John Attafuah blames the confusion on government’s poor handling of the entire sector and the “so called deregulation.” “It is clear that we are still not sure of what we want to do when it comes to deregulation; we think that by just saying it, we have done it,” he tells this paper in an interview.
He cautions government over the use of propaganda in the management of the Ghanaian economy, adding that “you cannot deregulate by propaganda.”
According to Mr Attafuah, a true and proper deregulation should not necessarily lead to price increments, pointing out that “there will only be increments if we have distorted pricing before today.”
If government had not pretended that it was subsidising and allowed the prices to be at the level that they should be, there will be no reason for any confusion today, he notes.
“Instead of government concentrating on fixing the economy and getting the exchange rate stable and inflation down, it is busy trying to determine how much profit BDCs make and when you do that your exchange rate goes up and everything else is in disarray,” the former NPA boss asserts.
The Integrated Social Development Centre (ISODEC), which kicked against the deregulation policy, also expressed fears of players in the petroleum sector colluding to fix prices for their collective benefit and to the detriment of consumers.
“Our experience in this country has shown regulators to mostly be on the side of those they are supposed to regulate, and against those they ought to protect. Consumers will need to know what measures are being contemplated to forestall cartel formations in the sector,” it laments.
Government’s indebtedness to the Bulk Oil Distribution Companies (BDCs) reached about GH¢3.4 billion as of June 18, this year.
The debt according to the Chamber of Bulk Oil Distributors represents foreign exchange under-recoveries, price under recoveries and the financing cost (interest) for bearing price under-recoveries, also known as the real value factor (RVF).
“The BDCs are really suffering. Now, we have reached a limit where if we don’t settle the debt owed banks, they will not issue us letters of credit to purchase fuel. This means that we will not be able to supply fuel and could create fuel shortage,” explains Chief Executive Officer of the Chamber, Senyo Hosi.
He calls on government to put measures in place to fix the macro-economic situation and strengthen the cedi against the major foreign currencies.
This, according to him, would be a more permanent solution since the exchange rate is an important part of the pricing formula.
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