Ghana: NPA Explains Variations In Fuel Prices

Ghana’s petroleum downstream regulator, National Petroleum Authority (NPA) has given reasons for the variations in fuel prices at the pump of the various Oil Marketing Companies retail outlets across the West African nation.

Ghana’s petroleum downstream was deregulated on 1st July, 2015.

Prior to the implementation of this policy, the regulator, NPA, set and published the Ex-Refinery and Ex-Pump prices of all petroleum products.

With the introduction of the deregulation policy, prices of fuel are now determined by market forces.

However, this seems not to be understood by consumers who keep wondering why there is no uniformity in fuel prices.

There are some consumers and industry players who hold the view that those OMCs, which are selling fuel at lower prices, were engaging in illegalities.

Currently, GOIL,Total and Shell, which are the market leaders, sell fuel at GHS6.23 per litre, with other OMCs selling between GHS5.70 and GHS5.90 per litre.

In a presentation by Abass Ibrahim Tasunti, Head of Pricing at NPA, during a media engagement on Pricing Of Petroleum Products in Ghana last week, he enumerated a number of key components which make up the price build up of petroleum products.

He mentioned Special Petroleum Tax, Energy Debt Recovery Levy, Road Fund Levy, Energy Fund Levy, Price Stabilisation & Recovery Levy, Energy Sector Recovery Levy and Sanitation & Pollution Levy as the components.

He further mentioned Primary Distribution Margin, Unified Petroleum Price Fund (UPPF), BOST Margin, Fuel Marking Margin, Distribution Compensation Margin, Marketers Margin, Dealers/Retailers Margin and LPG filling Plant/ Premix/ MGO-Local Administrative Margin as other components that make up the price build-up of petroleum products.

Mr Tasunti said though NPA does not rule out any illegalities in downstream petroleum sector, their monitoring of the transaction between Bulk Import Distribution and Export Companies (BIDECs) formerly BDCs and OMCs, shows that the former sell their products to the OMCs at different prices based on a number of factors.

That, he explained, is the reason why some of the smaller OMCs could be selling their fuel at prices lower than that of GOIL, Total, Shell and other leading OMCs.

“For example, you and I can go to the same BDC and buy at different prices based on several factors. The volume of product you are buying, your payment track record, your credit terms, etc could be factors that determine the price.

“There are instances we have seen variations of up to 50 pesewas between an OMC prices from BDCs. In a free market as we have now, if you’re a smaller brand and you want to compete with a bigger brand, you will have to come up with strategies to attract customers by making the product cheaper to be able to sell,” he pointed out.

He added that the Price Build-Up formula is such that the only component that the OMCs have control over is the price at which they buy from the BDCs and the OMC Margin.

Under this circumstance, Mr. Tasunti said some of the OMCs reduce their margins in order to increase their sale volumes.

He said NPA monitors the situation to ensure that no OMC sells fuel at unrealistically low prices.

Source: https://energynewsafrica.com