Should the President go to Cape Coast or Elmina?

All over the country, the recent 5% increase in fuel prices are stoking popular anger, the ruling National Democratic Congress (NDC) administration is facing the brunt of even their supporters, while the opposition are using their propaganda machinery to look for scapegoats, and policy makers looking for solutions.

Should we, as nation, continuously play petrol politics to the detriment of harnessing the huge potential in guaranteed tax revenue from the energy sector that we need for development? I think we should be circumspect and holistic in dealing with these issues.

Yes, the NDC government has increased oil prices, and the disposable incomes of Ghanaians have been cut as a result. Yes, they lied that they would reduce petrol prices drastically when they desperately wanted power. But, with all seriousness, oil is an internationally traded commodity, and for Ghanaians to enjoy it, we must be ready to pay international prices to get our share. Even when we finally begin drilling our own oil, Ghanaians would pay OPEC-determined prices for crude oil.

The arguments that the Mills Administration are making, were the same arguments the Kufuor administration continuously made when they were in power. But the politicisation of petroleum issues, and the selfishness of our politicians, has always made the shoe look very ugly on the other foot.

As a nation, we should look at the issue holistically, and work towards longer term solutions to solve these problems, and educate the citizens that just as no president can make rain fall at their wish, they have no control of fuel prices, and can never reduce them drastically against world prices. With all sincerity, the government has little influence on global crude prices. Cutting or freezing fuel taxes is possible, but is it a good policy and will it benefit the majority poor? Or will it just benefit the oil companies, distributors, and the small middle and upper class who own all the vehicles?

In evaluating public policy options available to the government over the rising fuel prices, it is common knowledge that most Ghanaians support policies to reduce fuel prices by subsidies or reduced taxes. But price-minimisation policies are likely to harm the ordinary Ghanaian and the economy in totality, by increasing total fuel consumption and vehicle travel, and associated costs such as infrastructure, eroded revenues, vehicular accidents, import costs, and the emission of more pollutants.

In 2004, the Kufuor Government spent about ¢1,872 billion ($200 million) to subsidise the consumption of petroleum - higher than the ¢1,449 billion budgeted for the 2004 Ministry of Health budget, and equivalent to the total Highly Indepted Poor Countries (HIPC) relief for Ghana. Fuel price reduction is not the silver- bullet to mitigate the suffering of all Ghanaians, other carefully thought out strategies can benefit Ghanaians more.

Policies that will gradually and predictably increase fuel taxes, transport policies that will strategically improve and increase the efficiency of public transport systems, incentives to encourage fuel-efficient vehicle use, the development of alternative fuels, and alternative forms of transport will maximise total benefits, and make ordinary Ghanaians better- off. If these difficult, and yet carefully crafted, long term policies are instituted, fuel prices could more than double, and Ghanaians and the economy will not feel the impact.

It is true that fuel prices have increased significantly in recent years, and are likely to rise more in the future. Between 2000 and 2009, average Ghanaian gasoline retail prices have increased significantly, from ¢6,400 per gallon in 2000, to ¢53,000 per gallon currently, and crude oil prices rose from $27.72 per barrel in 2000, to $142 per barrel in 2008, and is presently around $80, but it is imperative for us to carefully define the problem in order to develop and implement optimal policies. We can take ad hoc and short term measures to curtail the excessive financial burdens in the country, but do we want to continuously take ad hoc measures? Long term solutions are painful, and may seem undesirable, because they do not solve the problem now, and do not appease voters. But, a short term solution, such as fuel tax reductions, exacerbates other economic, social and environmental problems.

Political adversaries of the ruling government are having a field day with their propaganda machinery against long term solutions. Among other arguments they are presenting is that the high fuel prices are harming the economy and overburdening consumers. It is true, but 70% of vehicles in Ghana are located in Accra, Tema, Kumasi and Takoradi, which are not the high poverty zones in the country. Therefore, the relatively well-to-do minority will benefit more than the majority poor. When we look back, fuel subsidy policies by the NDC Government in 1999, did more harm than good to the ordinary Ghanaian. Among its effects, were the shortages, long queues, hoarding, smuggling, huge Tema Oil Refinery debt, and it slammed the door on economic gains, as it raised inflation from 13.8% in 1999, to 40.5% by the end of 2000.

The government can take to other pro-poor policies to offset the impact of rising fuel prices. It is just prudent for the government to look at policies that reflect future needs, increase overall efficiency, and help solve multiple problems for Ghanaians.

If I was the President, I would first come out to apologise to Ghanaians for reneging on my campaign promise (at least for now), and explain that the realities of governance are totally different from political campaigns.

Then, I will stop the blame-shifting, and hit the ground running, with my 'Better Ghana' agenda, to attain long term maximum benefits for Ghanaians, with robust petroleum policies that would withstand the test of the time. This will prevent the President himself and future presidents the conundrum of always deciding whether to go to Cape Coast or Elmina.

Yes! Financial discipline at the Tema Oil Refinery is the first step. Then we will need to develop an efficient and cheap public transport system (I'm sure the Ministers got great insights when they boarded the trotros) to reduce our over dependence on fuel, explore opportunities to exploit renewable energy resources such as wind, solar, and geothermal power, provide tax reliefs for fuel efficient vehicles, develop other forms of transport by providing pedestirn and bicycle lanes, and encouraging car pooling among others.

And, to answer the earlier question, I believe President Mills, being a man of great integrity, would have loved to drive straight to Elmina to appease Ghanaians, but just like the village money lenders, who would decide what a family who owes money should eat for dinner, the International Monetary Fund (IMF) will always pressure the Mills government to take that difficult road to Cape Coast.