By The National Petroleum Authority (NPA) has affirmed its intention to proceed with the implementation of the price floor for petroleum products starting from April 16, 2024, under the New Pricing Guidelines for Oil Marketing Companies and other stakeholders in the sector.
This decision remains firm despite resistance from certain Civil Society Organisations (CSOs), including the African Center for Energy Policy (ACEP) and the Chamber of Petroleum Consumers (COPEC).
According to Abass Tasunti, the Head of Economic Regulation at the NPA, extensive consultations within the industry have been conducted, with the majority of stakeholders expressing support for the policy.
“We have to press ahead to deal with issues of price cutting which threatens the stability of the industry and possibly the financial sector”, he said pointing out that the policy will address such issues.
Mr. Tasunti spoke on PM Express Business Edition on April 4, 2024, with host George Wiafe.
“We believe that the consultations done so far with the required stakeholders support our decision to go ahead with this programme. We believe that the opposition to this programme is influenced by lack of understanding, and we are promising to up our education”, he added.
Mr. Tasunti explained that the overall objective of the price floor is to aid full cost recovery for players in the sector.
He noted that this is part of efforts to deal with some challenges in the industry on the pricing of petroleum products.
Background
The price floor for petroleum products is part of the Amended Pricing Guidelines rolled out by the NPA on April 1, 2024.
According to the Amendment to the Pricing Guidelines, the NPA “shall set and communicate price floors for the deregulated products for each pricing window.”
In a letter to industry players signed by the Deputy Chief Executive of the NPA, Curtis Perry Okudzeto advised all the Petroleum Service Providers to strictly comply with the guidelines.
The National Petroleum Authority promised that it shall periodically furnish Petroleum Service Providers with the full pricing formula, stating the specific taxes, levies, and margins applicable for each pricing window in excel format.
The Petroleum Service Providers, according to the National Petroleum Authority “shall comply with the price floors set for the deregulated petroleum 0products for each window by not selling products below those prices”.
Industry Concerns
On his part, the Chief Executive of the Chamber of Bulk Oil Distributors, Dr. Patrick Kweku Ofori, said there are still some concerns that need to be addressed before the floor price for petroleum products finally takes off from April 16, 2024.
Dr. Ofori pointed out that there is the need to take a second look at the fore rates which will be used by the NPA in setting the price floor.
“We wish they could use Bloomberg Foreign Exchange rates, rather than Bank of Ghana rates”, he said.
Calling for more engagements, the Executive Director of the Chamber of Petroleum Consumers, Duncan Amoah emphasised the need to address all pertinent issues with stakeholders.
He is however of the view that the NPA set a ceiling price if it is going ahead to implement a floor price.
“So if we don’t do the Price Floor, what will happen to the industry, will it crush? I think the answer is no”, he said.
The Executive Director of the African Centre for Energy Policy, Ben Boakye, said the market is not ready for the policy.
NPA on Industry Concerns
Mr. Tasunti expressed optimism the policy will meet industry expectations and resolve all challenges identified.
“You should remember that there are several policy measures that the NPA had introduced in the past, and there was some initial opposition, but the regulator went ahead and it was successful”, he recalled.
“As a regulator, we do a lot of engagements, and the feedback has influenced our decision to go ahead”, he added.
He assured that the policy will take off smoothly and Ghanaians will appreciate the impact it will have on the industry.
