In the early part of last year, following a sharp increase in the prices of petroleum products, we did caution the dangerous consequences that the government's decision was going to have on our revenue mobilization efforts. We did caution that the best way to strengthen the base of our economy and put it in good stead to growth was not to be resorting to the introduction of taxes and levies, worst of all, on the prices of petroleum products.
We did state that increases in the prices of petroleum products, have often had adverse effects on the cost of doing business, particularly in the industrial sector, where companies depend on petroleum products as a major energy source in their production process.
On Friday, February 17, 2006, the National Petroleum Authority (NPA) announced a review of the prices of petroleum products, raising prices at between 5% and 11.36%. For those who had taken earlier assurances by NPA that price adjustments would be made in line with developments on the international market, the levels of the increase came as a surprise.
This was because apart from a twenty cedi (¢20.00) depreciation of the local currency against the dollar during the period, the average world market crude oil price for the period was less than $63.50, far below the $65.00 crude price used to work out the prices that saw, for instance, premium fuel price settling at ¢32,000.00.
Considering that the last time that those increases were made, the price of premium fuel, for instance, was increased to ¢32,000, using crude oil price of $65.00 one would have expected that the NPA would live up to its promise of letting consumers pay realistic prices.
The NPA of course has used an alibi to justify the latest increases. But even in seeking refuse in that alibi, the NPA threw reasoning to the wind.
According to the NPA, “the efficiencies of TOR, which in the recent past contributed immensely to the lowering of ex-refinery, and hence, ex-pump prices below the import-parity levels, would not be available to feed into the pricing,” and adds that the effect of this, among others, necessitated the increases in the prices of all petroleum products.
It is unthinkable that the NPA would be viewing efficiencies in the refinery not as part of the normal production process, but rather as an exception, such that consumers have been called upon to pay for it.
Why should the tax-paying consumer pay for the inefficiencies of TOR?
The general impact of increases in petroleum prices on the cost of living and doing business generally, suggests that it is unwise to use that channel as a major source of revenue mobilization.
The cost of living is already shooting up; with transport fares also up at an average of 20%, leading to scuffles and quarrels between commuters and commercial vehicle operators.
As workers gear up to demand higher wages and organizations spend more on their energy sources, the costs of production would inevitably rise.
The Chronicle would like to caution government once again that the little gains that we have made economically, mostly resulting from the lessened pressure from external creditors, due to debt cancellations and earlier sacrifices by Ghanaians, are in danger of being eroded.
If we do not take care, as our manufacturing industries continue to suffocate under high costs of productivity and unreliable power supply, the economy would implode at the slightest onset of any major price dip for our major exports! What would we then have to fall on?
The use of petroleum products as a revenue-generating source is dangerous for the economy!