After 5 years of implementing the Petroleum Price Deregulation policy by the National Petroleum Authority (NPA), it is sad to note that this policy is not working for the average Ghanaian.
We all had hopes that this new policy will reduce prices and create competition among OMCs but the reality now is that they have become a cartel without the said Competition.
In all my Analysis I don’t like to confuse my audience with complicated calculations and Statements so I will keep this very simple.
There are two main companies in the downstream value chain, the BDC and OMC. Let’s leave out the OMC for a minute because their pricing is based on the price BDC sells them.
In the oil business everyone makes money on margins. The price benchmark for finished products is Platt. So prices are set at Platt plus your margin.
The Local BDCs negotiate their own prices with their sellers around the world. These BDCs after negotiating their prices, are allowed to charge what is called a supplier’s premium.
This premium can be as high as $80/MT depending on the pricing window. This supplier’s premium is factored into the pump price paid by me and you.
Due to Covid-19, petroleum prices on the world market collapsed. In March 2020, Petro was sold at $612/MT and the average pump price in Ghana was GH₵5.40.
During the pandemic lockdown, the world petro price tumbled to $164/MT but the pump price in Ghana only went down to GH₵4.00.
We all know that the cedi actually appreciated during that period. All things being the same, a 73% reduction in world price reflected in 26% reduction in local pump price. The industry made a bumper harvest during this period.
Forward to December 2020, 2 days before Christmas, we wake up to a pump price of GH₵4.85. The justification for this increase is that price of Petrol has gone from $415 to $442 as well as the cedis depreciating slightly.
I am a businessman so I subscribe to business making profits so I am not against these companies increasing their prices to reflect changes in exchange rate and world market prices.
What I am against is when prices drop, they don’t apply the same sensitivity to reducing prices for Ghanaian. What we are told is that they are recovering their losses. Simply put, we are being ripped off.
In a fair deregulation, the price sensitive should be in both direction. If the world market reduces by 73%, all things being equal we should have at least 65% reduction in local pump. This am afraid is not the case in Ghana with the current deregulation policy.
In 2021, I urge the new government to take a critical look at this policy to be fair to Ghanaians. Government has a big role to play in changing the law to benefit the original Ghanaian not big companies like BDCs and OMCs.
NPA needs to sit up and do its work. The license fee to become a BDC is $450,000.
Ask yourself why companies are jumping on their heads to pay $450,000 a year for a license. In 2021, we no go sit down make them cheat us anymore.
About the author; Kwadwo N. Poku is an Energy Analyst