Business News of Friday, 16 January 2015
Government is set to review the pricing formula for petroleum products.
The review will include the mitigation fund which the president John Mahama hinted at during an interview last week.
Announcing the review Friday, Finance Minister Seth Terkper said at a press conference, the inclusion of the mitigation fund will ensure that government saves enough money when prices of petroleum tumble on the world market and that when prices rise government will then fall on the fund to cushion consumers.
The current pricing formula includes crude oil prices, exchange rate, taxes and margins.
A change in any of the indices automatically affects the price of the product.
When the price of crude oil went up to over $120 per barrel, it affected the prices of petroleum products in Ghana.
It was therefore not surprising that when the prices of the product hit an all time low in five years and selling at $47 per barrel, Ghanaians demanded a reduction in the prices of the products on the local market.
Government reluctantly announced a 10 per cent reduction in prices, a reduction some critics have been quick to rubbish.
Contrary to the assertions by the critics, President John Mahama in an interview last week said the ten per cent reduction was drastic.
He suggested the introduction of the mitigation fund that would cushion consumers when the price of the commodity skyrocket.
In line with that suggestion, the Finance Minister announced Government was considering a review of the pricing formula to incorporate the mitigation fund.
“In the new pricing formula there is a mitigation account which makes the automatic adjustment operate within a corridor where you build up the stabilization fund for the automatic price adjustment as prices are going down, and you fall on them when prices go up.
“We do have a more complex [situation],” he stated but said this was in the best interest of Ghanaians.
It is not however clear yet when the formula would be reviewed.