From 1 August 2022, prices of petroleum products could decrease between 3 and 6 per cent, the Chamber of Petroleum Consumers-Ghana (COPEC-GH) has predicted.
According to COPEC-GH, the expected reduction will have been bigger if not for the depreciation of the cedi against other major international currencies.
The drop in fuel prices will be the second consecutive time since oil prices started falling on the world market.
“What we picked from the market for the first window of August [2022] is an indication that prices at the pumps should have gone down significantly. The unfortunate thing at this point happens to be with the currency [cedi]. As I speak with you, over the two weeks window, the FX has seen some depreciation, from about ¢8.30 to about ¢8.90 pesewas currently,” Chief Executive of COPEC, Duncan Amoah, lamented.
“And so that could on its own erode the reductions that you and I could have seen at the various pumps,” he added.
Mr. Amoah urged the government to take a second look at the deregulation policy to cushion consumers against high fuel prices.
“We have said on a good number of occasions that the earlier we take a second look at this whole regulation programme, the better it would be,” he advised.
Pump prices of fuel have shot up 288 per cent since January 2017 to date, according to data from the energy think-tank Institute of Energy Security (IES).
Currently, diesel is almost GH¢15 per litre, while petrol sells for over GH¢11 per litre at the pumps.
Some filling stations over the weekend recorded some marginal price drops.
At the beginning of this year, a litre of diesel was sold at GH¢6.70 but now goes for GH¢14, with many fearing that the worst is yet to come, given the deteriorating economic situation in the country and happenings on the international stage.
While the war in Eastern Europe might have impacted prices across the world, most industry watchers hold the view that the depreciation of the cedi – which has lost about 30 per cent of its value this year – is a much bigger problem.
What can be done to address the problem?
Despite the country producing oil in large quantities, the lack of refineries has prevented the country from enjoying lower prices of finished products.
As of September 2020, crude oil production capacity in Ghana was 196,000 barrels per day.
However, Ghanaians continue to buy fuel at exorbitant prices due to importation and taxes slapped on the commodity.
The Ranking Member on Parliament’s Energy Committee, John Abdulai Jinapor, has entreated the government to revamp the Tema Oil Refinery (TOR) to process Ghana’s crude to meet local demands instead of relying on the importation of refined oil.
Additionally, he suggested that the Bulk Oil Storage and Transportation Company Limited (BOST) should hold strategic reserves which could be used to ease supply challenges whenever necessary.
According to him, revenues from fuel levies should be enough to defray some of the cost to cushion consumers from bearing the brunt.
Mr Jinapor is not the only person to make such proposals to the government to address rising fuel prices.
COPEC-Ghana Executive Secretary, Duncan Amoah, had told The Ghana Report:
“We have a local refinery that we could have leveraged to get some fuel security at lower prices, but unfortunately, we don’t think there is a political will to refurbish the Tema Oil Refinery”.
Mr Amoah observed a fully functional refinery would cut the logistical cost, which adds to the price build-up by exporting crude to Europe to be refined before importing back to Ghana.
“They need to get TOR back on stream, and the need for political interference to be stopped holds the key for all for us,” he underscored.
Additionally, he cited the failure of BOST in executing its mandate.
Mr Amoah explained that BOST is supposed to store huge volumes of fuel and release to the market to level prices and check shortages “without overstretching the already burdened Ghanaian taxpayer”.
However, “we do not see that function of BOST, and they are now focusing on trading…which was not the purpose of the BOST Act but to hold strategic stock”.
Additionally, Mr Amoah wants the government to scrap taxes that add up to the fuel cost on the market.
This is because there are about 12 different taxes and levies on petroleum products, which adds up to almost 40% of the fuel price.
These taxes include the Energy Debt Recovery Levy, Road Fund Levy, Energy Fund Levy, Price Stabilisation and Recovery Levy, Sanitation and Pollution Levy, Energy Sector Recovery Levy, Special Petroleum Tax and Primary Distribution Margin, BOST Margin, Fuel Marking Margin, Marketers’ Margin and Dealers (Retailers/Operators) Margin.