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Allow market forces to dictate prices of Petroleum products

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The time has come for the government to allow market forces to dictate the prices of petroleum products in the country, Mr John Attafuah, former Chief Executive Officer (CEO) of the National Petroleum Authority (NPA), has advised.

According to him, such a move would enable the consumers of petroleum products to pay realistic prices at the pumps, depending on the cost of crude oil on the world market; ensure greater competition within the sector which would eventually force prices down, while freeing the government the challenge of subsidising the products which leads to huge debts.

Mr Attafuah, who gave the advice in an exclusive interview with the GRAPHIC BUSINESS in Accra over the weekend, said by moving away from pricing the products on the Ghanaian market, the government would also be seen to be serious with the deregulation of the downstream petroleum sector, a process which began around 2005.

His call comes at a time when experts in the industry have condemned the continuous dictation of petroleum prices on the market by the government under the guise of what they termed debt owed the bulk distribution companies (BDCs).

“We started deregulating the sector because we knew the impact that it was going to have on the prices of the products on the market and everyone can attest to the positive impact it had on the prices at the pumps,” he said.

Mr Attafuah said due to the intense competition within the sector at the time, players were in many instances forced to sell products below the gazetted prices by the NPA.

Experts have argued that players in the industry make money from selling volumes and, therefore, are willing to sell at lower prices to gain more from having a bigger market share than to price higher and lose or at best, break even.

Mr Attafuah said deregulating the sector also freed the government from using funds meant for development to subsidise petroleum products which favoured the rich.

Prices on petroleum products

Commenting on the current ex-pump prices of petroleum products, he said: “I think they are currently overpricing. In my view, if we are using the crude oil prices on the international market as a proxy, then petrol for instance should be selling at about GH¢9 per gallon.”

To him the current prices on the market were not fair and must be done appropriately.

But the government has explained that the prices were high because it was financing huge debts accrued over the period when the prices were high.

However, the government has not been able to tell how it used the subsidies it budgeted for over the period.

Petroleum price mitigation fund

In his interview on a local radio station in Kumasi a week ago, President John Dramani Mahama, stressed the need for the country to have a petroleum mitigation fund from where funds would be used to subsidise petroleum products when crude oil prices go up.

But Mr Attafuah described that intention as flawed because of the impact it would have on the deregulation exercise.

“We do not need such a fund also because the government will still be having a say in pricing the products but we have moved away from that system long ago and we should not go back to it”, he said. GB

Source; Daily Graphic

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Reporting Oil and Gas project was launched on 4th June 2009atTakoradi, Western Region, Ghana by Penplusbytes (PPB – www.penplusbytes.org) with the vision of providing a one stop online information and knowledge about Ghana’s oil and gas sector
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