The Executive Director of the Chamber of Petroleum Consumers, Mr. Duncan Amoah, has indicated that the unabated rise in petroleum prices are likely to continue unabated, while highlighting the severity of the issue as not being a “child’s play”.
Speaking on PM Express, Mr Duncan said as a country, “we are simply not planning for our people. We are getting into very difficult times,” he averred. This is against the backdrop that, the country’s storage capacity of petroleum products is only for one-month, other than an ideal capacity of three months or more.
“You shouldn’t have a country that solely depends on what the private Bulk Distribution Companies (BDCs) are able to store for all of us. There was a good reason for which we put up the BOST facility, modeled just similar to the Oklahoma cushioning in the United States.
“What they are able to do is to store crude for as long as they could so that when times are difficult they can release crude onto the market… They plan for the rainy day. We fail to plan… (what we do is that), we [only] buy and sell.
Duncan Amoah
Meanwhile, Mr. Mohammed Abdul-Kudus, the Communications Manager of the National Petroleum Authority (NPA) said:
“We currently are having not less than a one-month storage capacity and there are other vessels that are actually online to deliver as and when their time is due. This might not be up to what is ideal, but there is guarantee for the availability and regularity of the supply of petroleum products.”
Mohammed Kudus
Supply capacities to be affected in worsening global conditions
However, such supply capacities stem from access to forex at a competitive rate to make such purchases and the general bottlenecks of supply on the global market. While as high as three-month storage capacity would be ideal to ensure stable supply in the short term, this may be affected when global conditions worsen.
Already, forecasters are pessimistic about the uncertainties in the global market, even raising concerns of a prolonged effect (3 to 5 years) of higher energy prices due to supply bottlenecks on the global market and the scarring effect of the Russia-Ukraine war.
That said, in recent times, some steps are being taken to cushion the players in the industry, especially, the BDCs on the availability of forex at competitive rates by the Bank of Ghana for the importation of these products.
Mr. Senyo Hosi, the Chief Executive of the Chamber for Bulk Oil Distributors (CBOD), said:
“The Bank of Ghana has been very supportive in this entire process. We started facing these problems significantly in the early part of the year and by the beginning of the second quarter they moved with a structured intervention to support us. Some of these solutions are significantly inspired by some of the structures they put in place. There are solutions being developed and I think we should have these things resolved.
“The truth of the matter is that we are not paying realistic prices. You have a lot more people trying to speculate. So sometimes, as prices are supposed to be adjusted high people do not or they will stock a lot more and hope that in the next window they are going to recover. The truth is that, this particular half year has ended with a lot of massive losses within the BDCs and may be, even the OMC sub-sector. It is sometimes mind-boggling when you see the rates that are actually at the pump.”
Senyo Hosi
Most OMCs are running at losses and are on the verge of collapse. As a result of this, most have had to charge lower prices while employing all kinds of models, Senyo Hosi said. He added that“we have to put in place structures that make the market reflect the price”.
Choice Between Product Availability or Price Hike
Considering the foregoing, he averred that, two things must happen: if the players fail, the entire supply chain will also fail. If the supply chain is failing, the IOT confidence in the Ghanaian market will also fail, thus reflecting an ultimately higher cost for the country. “We need to make sure our prices are a bit more realistic and there is room for regulation”, he said.
However, for Mr Duncan Amoah, “there is a higher cost to having higher pump prices in the Ghanaian economy. Product availability has got nothing to do with the price per se and its got nothing to do with the level of taxes,” he said.
“If you need a product available you plan for it. You make sure that whoever supplies you is able to supply you the product… But if you go and add incremental taxes the way we have it on ours such that at one point in time in 2015, we said crude prices have tumbled so let’s put onto it special petroleum tax (SPT) because crude has dropped to below $30/bbl. So, that dynamics for which you set out to collect SPT does not apply any longer, yet we are collecting it.
“Where we sit today, petroleum price or product alone will drive inflation for a very long time. And when things go up in this country, they hardly ever come down again. And so if anyone is expecting fuel prices to decline to pre-December period, we may never get there again.”
Mr Duncan Amoah
Speaking on what must be done going forward, Mr Michael Bozumbil, the CEO of Petrosol, said:
“We should quickly change the price stabilization levy (PSRL) from just being a traditional tax that goes into the government pool and convert it into a price stabilization and recovery margin and keep it at NPA with CBOG, AOMC with a representative from the Ministry of Energy managing that fund.
“[This could be done] just as we are managing the UPPF fund. The UPPF fund is being housed in NPA and that is what is allowing the uniform movement of petroleum products across the country. If this fund had been kept in the Ministry of Finance, there would have been a lot of chaos in the country.”
Mr Michael Bozumbil
