The Africa Centre for Energy Policy (ACEP) is pressing government to reintroduce fuel price relief measures, warning that higher international crude oil prices are expected to drive up ex-pump fuel prices in Ghana in the coming pricing windows.
The call comes as Brent crude prices inch towards $80 per barrel, following renewed hostilities involving the United States and Iran, as well as attacks on tankers transiting the Strait of Hormuz, a critical global oil shipping route.
The latest developments have reversed the recent decline in crude prices that had contributed to lower fuel prices in Ghana.
Speaking to Citi Business News, ACEP’s Policy Lead for Petroleum and Conventional Energy, Kodzo Yaotse, said Ghana, as a net importer of refined petroleum products, should prepare for higher fuel prices if the current geopolitical tensions persist.
“We have seen when it happened from late February throughout March, where crude prices went all the way to above $100 a barrel. Such uncertainties occasioned by disruptions in the supply of crude products are something that we should expect,” he said.
He noted that crude prices have already climbed to around $75 per barrel, with the market responding to expectations that Iran could again disrupt traffic through the Strait of Hormuz.
“For net importers like Ghana, it means there will be a pass-through of the costs. If the global prices are increasing again, we have to prepare for the pass-through of the price increments, and unfortunately, that is what we have to contend with,” Kodzo Yaotse stated.
According to him, the impact of rising international crude prices on Ghana’s fuel market is determined by three key variables – the international price of petroleum products, the exchange rate and taxes embedded in the country’s fuel pricing structure.
Kodzo Yaotse warned that sustained increases in global oil prices could undermine Ghana’s recent macroeconomic gains, particularly the sharp decline in inflation.
“We have had inflation at an all-time low, around three percent. You don’t want exogenous factors that would shock the system to cause the stability and the inflation that we have been enjoying for a time to shoot up,” he said.
He therefore called on government to make greater use of existing policy tools, including the Stabilization Levy, to cushion consumers during periods of sharp increases in global oil prices.
“The purpose of that levy is to smoothen prices when there are steep escalations like we have seen. But over time, we have only used that money to pay for premix fuel subsidies, which renders it incapable of doing the job that it’s supposed to do for us,” he argued.
The energy policy analyst also renewed calls for government to reintroduce fuel price relief measures in a more structured and predictable manner rather than relying on ad hoc interventions.
“We need that relief to come, but we need it programmed around the thinking of the geopolitics of what is happening. It should become a matter of public policy where, if prices increase to a certain level, these reliefs automatically kick in,” he said.
According to Kodzo Yaotse, an automatic price relief mechanism would enable both consumers and Oil Marketing Companies to plan more effectively during periods of heightened volatility in global energy markets.
“If we have that conception of a future plan that allows us to price these uncertainties into the pricing framework, then when prices escalate, the reliefs automatically kick in. That helps both the consumers and the marketers to plan appropriately,” he added.
Government officially scrapped the remaining diesel fuel price relief of GH¢1.07 per litre ahead of the second pricing window of June, which took effect on June 16.
The decision brought to an end all temporary fuel price interventions introduced to cushion consumers and businesses from rising petroleum prices triggered by tensions in the Middle East.
