Downstream petroleum pricing regime in Ghana

1. BREAKDOWN OF PETROLEUM PRICING IN GHANA: PREPARED BY THEO ACHEAMPONG
The ex-pump
price is the price
at which the
Ex-pump Price public buy fuel at
the filling station
Ex-refinery Price Taxes/Levies OMC Margins
Constitute
about 35-40%
of final
product price
Related Charges = Off-
loading cost + In-transit
Cost Insurance Freight Related Charges e.g. losses + Inspection + L/C
cost + Financial costs +
(CIF) demurrage at the port if Storage cost + In-plant
tanker overstays in berthing losses + Rack loading
cost + Operating
Freight on Board (FOB) Costs Insurance Freight (Shipping) Charges
@Word Crude Oil Prices Charges
Adapted from Amin Adam, 2012

2. Source: GTZ

3. Issues to contend with
1. How do the subsidies come about? So long as prices fluctuate on the world markets, prices
paid locally will vary from time to time.
2. Can the gov’t implement a full-pass-through pricing regime where people pay 100% world
market prices? Possible but not without adverse economic and social effects which needs to be
cushioned. We need to know the demography of the people consuming the products and their
elasticities of demand so appropriate interventionist policies can be implemented.
3. Why hasn’t cross subsidization worked? What is the net effect of cross subsidization on the
government’s balance of payments position? How much has ‘really’ been paid in subsidies and
can these be independently verified?
4. Taxes and levies alone constitute almost 40% of the price build-up. So how can the government
and NPA claim to be subsidizing when in fact it is the same taxes that are paying for the
subsidies? Is the gov’t borrowing any extra monies to pay for the subsidies?
5. Possibly need a price stabilization fund (independently managed and decoupled from the
consolidated fund) which will cushion us from the effects of volatility. The mechanism of
operation can be looked at in further detail but will have benchmark crude oil price kicks the
fund into operation. Saving for the cyclical booms and busts!
A full and clearer picture of the whole downstream setup is required. On this note, I would
entreat the gov’t to set up an independent panel of experts to holistically assess/review the
downstream petroleum sector with recommendations for the future.