Downward Trend of Oil Prices Reveals Damage to the Ghanaian Economy

The Minority Spokesman on Mines and Energy, Mr Abraham Kofi Asante, has described the government’s stand not to reduce fuel prices due to falling world market prices of crude oil as “totally unfair”. Just like most Ghanaians, he claimed that since the world market prices assumed a downward trend, Ghana has been reaping a windfall that should benefit fuel consumers, and Ghanaians in general so the government must reduce oil prices. As a minister, I expect him to know better but I guess not. Firstly, we must understand that all these years, the previous government have been subsidizing world petroleum prices in Ghana when petrol were being smuggled to neighbouring countries to make profit. As a result Ghana accumulated about 2.3 trillion cedis of deficit financing on oil. The current government in an attempt to deal with that inefficient policy, created by the former administration, had to undo the subsidy, which allowed petroleum price to increase in February.

In June 2001, the government introduced a formula, which has yielded in a gain of at least $54 million that has been made from the unexpected drop in world market prices of crude oil. By logic, there is nothing wrong with Ghanaians assuming that there should be a direct correlation between world oil prices (ex-refinery prices), and price per litre in the country (ex-cum price), hence a reduction in oil prices in the country. But the $54 million gain has been absorbed into the deficit. It is important for Ghanaians to be aware that between August and November, parliament came up with two tax bills in support of increased petroleum prices, which Mr. Asante and many others voted in favour of. These tax bills has nullified the benefit that Ghanaians should have enjoyed. When you do the math by considering the 2.3 trillion cedis deficit finance that has to be serviced, the interest on this deficit, which is 250 billion cedis, and an interest of 25 billion cedis on monthly basis, Ghanaians are left with nothing. When the last bill was introduced in November, there was an advolerum tax of 15%, and specific excise duties tax of 200 cedis on a litre that was added. If we consider the windfall, which translates into 56 cedis that Ghanaians should have gained as a result of the downward trend in world oil prices, against the 200 cedis deficit per a litre, there are still 144 cedis deficit per litre, which is still being subsidized by this governent. According to the minister, “It is unacceptable for the government to resort to window dressing to erode the relief that is supposed to be enjoyed by the customer,” he further declared that he recalled that after the increase in fuel prices in February, the Minister of Energy, Mr Albert Kan-Dapaah, assured the nation that the government would adopt a formula to adjust petroleum prices automatically in response to international oil prices and the exchange rate of the cedi. Unfortunately, Mr. Asante was silent about the new tax bill he helped pass, that has eroded this benefit for Ghanaian oil consumers, and he is calling the government’s stand on this issue “Unfair” because oil prices has not been reduced despite the reduction in world oil prices. According to Mr. Asante, the formula for determining the prices of petroleum products is government’s own policy and has no legal backing. Well, it is important to know that the new tax bills which were parliament’s doing are not part of the government’s formula. The government did not anticipate the new tax bill that has eroded consumers’ gain in this scenario. Especially when the minister of energy announced the initiative back in June. I am sure that most Ghanaians have confidence in this government, and understand how cautious this administration is moving to resuscitate the ailing economy. This government is allowing the constitution to work and separation of powers is sometimes a pain in the you know what… That is why Ghanaians must learn that you cannot blame the Executive Branch of government (the president and his cabinets) for the motives of parliament. If it is not hypocritical on the part of the minister, then his motives are clear just like other group of parliamentarians who once in a while would like to “cry over spilled milk”.