The petroleum downstream observed a market turbulence in Ghana in 2022. Prices of petroleum products picked up in the 2nd pricing Window of March, 2022 and peaked in the 1st Window, of 2022, beginning with an average price of diesel and petrol at Ghc6.85 per litre for each of the products and peaking in the 1st Window of November, at Ghc23.43 per litre for diesel and Ghc17.42 per litre for petrol.

The surge in prices led to the decline in the consumption of diesel by about 8% from 2,266,994,900 litres in 2021 to 2,112,680,150 in 2022 and petrol by about 7% from 2,094,346,800 litres to 1,934,898,830 litres in respective years.

In addition, the price of LPG also increased from about Ghc8 per Kg in January to Ghc13 per Kg in November, decreasing consumption by about 13% from 345,478,075 kg in 2021 to 305,076,209 kg in 2022 being the highest recorded decline in 2022 among the three most used products, petrol, diesel and LPG.

In the price turbulence, uncertainty in the market and the burden that brings to the petroleum user, the government introduced the Bank of Ghana forex auction to the BDCs, and later the Gold for oil policy through Bulk Oil Storage and Transportation (BOST).

The first option began with the auction of about 90% dollar needed by the BDCs to import finished products in April, which was subsequently reduced to about 25% in November 2022.

Although the percentage of dollar auction by the BOG to BDCs was about a third of monthly import cover to the BDCs in the last quarter of 2022, it comparatively declined prices of petroleum products by about at least 3% in each window from the inception of the intervention.

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The second option, Gold for Oil introduced in the last quarter of 2022 has also pushed prices of diesel and petrol further downwards.

The price of diesel was projected to increase in the 1st window of February 2023 by about 7% from about Ghc14.40/L to about Ghc17/L. However, diesel was sold at Ghc15.25, reflecting the impact of Gold for Oil. Further, the price of petrol declined in the 2nd window of February by about 4% due to the G4O.

The government’s interventions have seen prices of petrol and diesel stabilize or declined throughout 2022 and the first two months of 2023. However, the price of LPG keeps on increasing, now selling around Ghc15 per kilogram in the 2nd window of February, discouraging households and small businesses from using clean cooking fuel in their respective user activities.

This higher and unchecked surging of LPG prices is likely to reduce the consumption of LPG in 2023, negatively affecting government’s policy target of achieving 50% LPG penetration of households by 2030, and making this deadline one of the unachieved deadlines on the LPG agenda.

The non-affordability of LPG forces some households to use unclean cooking fuel like firewood and charcoal, which are known to depleting our forest cover, causing respiratory diseases and climate change.

There have been calls to government to consider scrapping or reducing tax and levies of about Ghc1.21 per kg which is about 9% on LPG price build-up in February. The scrapping of the tax and levies is not sustainable since international price LPG has been on an upward trend since December 2022, causing the impact of the scrapping of taxes insignificant in subsequent windows.

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Therefore, strategies to internalizing the pricing of LPG and making it affordable should be the focus of the government now, since it has achieved its objective on petrol and diesel. The dollar auction policy to BDCs should be directed at LPG imports and pricing since G4O is observed to be stabilizing petrol and diesel pricing.

This would have a better impact on LPG price reduction compared to the scrapping of the tax and levies. The direction has become a necessity because BDCs would hardly need auction dollars to import diesel and petrol because of the G4O policy, which is operating at a higher speed currently.

Benjamin Nsiah
Energy Policy Analyst

AMA GHANA is not responsible for the reportage or opinions of contributors published on the website.

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