Fuel Prices in Ghana – Here is Why They are So High

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Currently, a litre of petrol and diesel is selling at ¢6.90 at the various filling stations.

The Government has indicated that because petroleum prices in Ghana are deregulated, changes in prices in petroleum products on the world market have a direct impact on prices at the pumps.

However, several variables determine the final price build-up, some of which are beyond the control of the regulator (), , and Oil Companies (OMCs).

Below are the major variables that inform fuel pricing in the country:

World market price

Currently, a chunk of all petroleum products in the country are imported. The malfunctioning of the , which was intended to boost local capacity, has intensified the country's dependency on the international market.

As of November 19, 2021, the price of West Texas Intermediate (WTI) stood at $75.97 per barrel.

In this regard, all the cost that goes into shipping, landing, and discharging of the imported product and all other cost incurred by the importer are added to the world price before it is sold to the OMCs locally.

Both the importer and the OMCs will also add their margins to make some profit.

Cedi depreciation

Because the fuel is imported, the exchange rate plays a major role in the price build-up.

The importers purchase the product in dollars, and thus, the performance of the against the informs how much cedis the importers would need to purchase a certain quantity.

This invariably has a bearing on how much cedis the local OMCs would need to purchase the product from the importer – and that also informs how much the fuel would be sold at the pumps.

For instance, if the OMCs buy a litre of fuel at $1, the same quantity of fuel would be sold for ¢5.90, under the current exchange rate.

Taxes and Levies

Currently, the Government has imposed 12 different and levies on petroleum products, which also determines the price of fuel in the country.

An assessment of the current price build-up indicates that for every litre of petrol now sold at ¢6.9, there was a tax component of about ¢2.70, constituting about 40 per cent of the total price build-up.

The taxes and levies include

Taxes and Levies Amount
and Pollution Levy 10Gp
Energy Debt Recovery Levy 49Gp
Road Fund Levy 48Gp
Energy Fund Levy 1Gp
14Gp
Energy Sector Recovery Levy 20Gp
Special Petroleum Tax 46Gp
Primary Distribution Margin 11Gp
Margin 9Gp
Fuel Marking Margin 5Gp
Marketers' Margin 46Gp
Dealers (Retailers/Operators) Margin 30Gp

Government has, however, suspended the Price Stabilisation and Recovery Levy (PSRL) on petroleum products for two months, which took effect on November 1, 2021.

Meanwhile, the (IES) says per its assessment, the of the levy is insignificant, given that the accumulated increment in prices is more than the 14p that the levy catered for.

The IES has projected that the price of fuel will hit ¢7.0 per litre by the end of the year.

The of says its members have been compelled to drop their margins, in the wake of the increment in .

The Association said if OMCs were to apply their full margins to cover the cost of operations and profit, a litre of petrol would have been sold for ¢7.21 at the pumps.

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