Crude Prices Go Down Worldwide: What About Fuel Prices In Ghana?

Prices of crude oil on the international market have seen a steadily decline over the last months prompting calls on the National Petroleum Authority (NPA) by consumers to reduce the prices of petroleum products but the Minister of Energy and Petroleum has given an indication of the unwillingness on the part of government to ease pressure on the citizenry.

Reasons advanced by the government and the NPA to justify the regular upward adjustment among others were the rise in the price of crude oil on the international market and the steadily depreciation of the Ghana Cedi.

The implementation of the automatic adjustment formula in determining prices of petroleum products also featured prominently as one of the reasons the Authority has increased fuel prices more than three times this year alone.

Fortunately for consumers, prices of crude oil on the international market have reduced drastically to its lowest over the last two years and it's hovering around US$88 per barrel, a far cry from the regular US$120 per barrel. The Ghana Cedi has also seen asignificant appreciation against the major trading currencies which should automatically trigger a reduction in fuel prices but, Armah Kofi Buah, Minister of Energy says government would not budge!

According to the Energy Minister, although there has been a reverse trend, the government instead of reducing fuel prices, would use the windfall to defray some debt!

Days after the Cedi saw a gradual appreciation against the United States Dollar, many consumers called on traders as well as the government to reduce prices of goods and services. Ironically, it was only private manufacturing companies such as Ghana Cement (GHACEM) and Dangote which heeded to the pleas of the suffering masses and reduced the prices of cement whiles the government has remained adamant.

In an interview with Citi Fm last week, the Minister explained that, with a major banking crunch looming over Ghana due to government's outstanding debts to the Bulk Oil Distribution Companies (BDCs), it cannot take the risk of reducing fuel prices.

According to him, the BDCs also owe various banks in the country huge sums of money, so “it is only prudent for the state to use windfalls from the current local price levels to help clear the prevailing debt”.

Mr. Armah Kofi Buah also said the debt build up from under recoveries alone stands at some GH¢400 million, a situation he said “required urgent attention to save both the BDCs and local commercial banks."

The prices of petroleum products affect every single consumer directly or otherwise, so the NPA has decided to formulate a formula for calculating petroleum prices in the country.

The effectiveness of this model is determined by prevailing market conditions. From the formula, crude oil prices, exchange rate, taxes or levies and margins are the factors that influence oil prices. Per the reasons being advanced by the Energy Minister, it means the formula has been shelved and would only resurface when the consumer is required to pay more.

According the law establishing the NPA, it should be the object of the Authority to monitor ceilings on the price of petroleum products in accordance with the prescribed petroleum pricing formula as well as protect the interests of consumers and petroleum service providers. However, looking at the prevailing prices of petroleum prices, it can be said without any contradiction that the interest of the consumer is a secondary matter to the Authority.

Energy experts have predicted that the downward trend in the prices of crude oil would not see a reversal in the near future and so government must as a matter of urgency reduce fuel prices to give meaning to the automatic adjustment formula as well as the gradual appreciation of the Ghana Cedi against the Dollar. But, the question is, will the government pay heed?