The Association of Oil Marketing Companies is urging restraint among some industry watchers and analysts who are demanding a reduction in prices to reflect the downward trends in global crude oil prices and the relative stability of the cedi.
According to the CEO of the Association, Kwaku Agyeman Duah, the reduction can only be felt across the board when the OMCs are able to recoup their investments.
The factors that affect fuel pricing in Ghana include; the cedi’s stability, global oil prices as well as tax components and margins of OMCs that constitute the price build-up of a litre of fuel.
Global developments such as the Coronavirus outbreak in China, has led to a drop in demand for crude. This has also contributed to the drop in the price of the commodity as data from Bloomberg shows that as at Wednesday afternoon, February 26, 2020, a barrel of crude sold at 49 dollars, 51 cents.
Again, on the same Wednesday, the local currency had witnessed relative stability considering the fact that it recorded a year to date depreciation of 3%, per information from the inter-bank foreign exchange market.
The various tax components, about seven of them, also add up to the price. This includes the price stabilization levy which is triggered when prices drop on the global market. Currently, this is pegged at 12 pesewas per litre of petrol and ten pesewas per litre of diesel.
But the rate of reduction per OMC is largely dependent on how these three factors independently impact price margins.
Speaking to Citi Business News, the CEO of the Association of Oil Marketing Companies, Kwaku Agyeman Duah, further explained the reasons accounting for a seeming delay in lower prices across board.
“Hitherto, there was no comment about it, we were sweating under diesel, diesel price was so high that the price of diesel we bought sometime ago wasn’t the actual price. We had to somehow subsidize it and we have not recovered. So the rate at which the diesel price was going up that’s not what we actually increased. That is why when we are coming down, you do not expect to have a proportionate for the price because that is where we also recover. The question you may ask is how long will this recovery last and that depends on the market forces” he explained.
He argued that the price deregulation regime meant that players are allowed to set market prices without any regulatory interference.
Citing the high cost of credit for some members of the Association, Agyeman Duah was however confident that consumers should be able to enjoy a reduction in fuel prices if all other factors; the global reduction in prices and relative currency stability continue for a longer period of time.