‘Petroleum price policy unclear’

Business News of Wednesday, 21 January 2015

Source: Daily Guide

Dr Steve Manteaw ISODEC

The Civil Society Platform On Oil & Gas has expressed dissatisfaction with the lack of clarity in petroleum pricing in Ghana.

In a statement issued recently in Accra signed by Dr Steve Manteaw, Coordinator, it called for either an affirmation of the policy on deregulation by reducing petroleum prices in accordance with the established petroleum price build-up formulae or an abolishment of the policy to restore public confidence and trust in the relevant state institutions charged with the implementation of the policy.

“It is our conviction that the back and forth stance on the policy, including the recent imposition of a 17.5% advolorem tax on petroleum products at a time when according to the price build up formulae, the retail price of the product should be coming down and the threat to further impose a so-called price mitigation levy, has left most Ghanaians confused.”

It stated that deregulation as a policy has been under implementation since the late 1990s, and that several civil society groups, led by the Integrated Social Development Centre (ISODEC) have argued against it.

“The thrust of the argument against the policy has been that, as a third world country, we cannot leave petroleum pricing to be determined entirely by free market forces, and that government at all times ought to intervene in a manner that helps to cushion consumers from the full effects of price increases on the world market.

“Indeed, a major conclusion of a research undertaken by ISODEC titled, ‘The Distributive Effects of Economic Policy (DEEP), suggested that the manufacturing sector is constrained by demand – not capacity or supply. On the basis of this conclusion, it becomes imperative to know the potential impact of higher fuel prices on the cost structure of fledgling firms. Our guess is that the unit cost will go up, exerting further competitive pressures on manufacturing. We have reason to believe that without a countervailing measure – e.g. tariff increases in non-food consumer imports, it is almost certain that the manufacturing sector will suffer even more from rising cost of fuel.”

Though the Civil Society Platform On Oil & Gas said it has time and again pointed out that government’s deliberate intervention in petroleum pricing was necessary to protect domestic industries, especially the strategic ones, to provide opportunity for cushioning the poor from the vagaries of the market.

“Sadly, both the New Patriotic Party (NPP) and the National Democratic Congress (NDC) governments, from 1996 to date, have ignored ISODEC’s advice and proceeded to fully liberalise the downstream petroleum sector, paving way for private sector capture of the bulk importation of crude and refined petroleum products for retailing on the Ghanaian market. The private sector take-over of the market has become so incisive to the point of rendering the state-owned Tema Oil Refinery almost redundant by private commercial interests.”

As part of the preparation towards deregulation, the World Bank sponsored a Poverty and Social Impact Assessment (PSIA) of the potential fuel price hikes arising out of the deregulation policy. Sadly, the findings were never made public and therefore did not feed into the debate around the policy. To date, most Ghanaians do not know what recommendations were made in that report, and did not have the opportunity to debate the adequacy or otherwise of the recommended measures to counter the harsh effect of fuel price hikes within a deregulated environment, it stated.