As the lockdown to combat the spread of the corona virus is now in effect, Ghanaian families and businesses will have to reset. A domino effect on our economy caused by the pandemic is expected to bring about challenges such as loss of income, business, increase in the costs for goods and services, and other factors impacted by increased transportation costs.
The challenges of the current season provide a responsibility to quickly visit “win-win” opportunities to alleviate some of the financial burdens on all Ghanaians – April 1st presents a “no-brainer” opening to reduce the cost of petrol at the pump.
Petrol is at its lowest price since the 1990s – US$ 0.38/gallon wholesale from U.S refiners and Wholesalers. With this in mind, Ghana should expect a drastic drop of up to 20 percent in petrol prices on April 1st.
Petrol is currently imported into Ghana for less than US$ 0.24/litre or GHc 1.40/litre (based on FX rate of GHS5.85 GHc/US$).
The daily price indicators used for the Petroleum Price Build-Up (PBU) as published by the National Petroleum Authority (NPA) are as follows:
– 1st March: US$ 540/ton (t)
– 16th March: US$ 434/ton (t)
– 1st April: US$ 212/ton (t)
This translates to a drop of 50 percent from 16th March and a 60 percent drop from 1st March.
Going by these Price Build-Up (PBU) indicators and the methodology used to derive them, we expect petrol prices to go as low as GHc GHc 4.00/litre. This price can go down even further with Government interventions in the form of tax breaks.
From the PBU, the taxes and distribution costs of petrol are GHc 1.50/litre and GHc 1.10/litre respectively (or GHS 2.60 combined); which represents about 65% of the pump price of petrol.
This makes Ghana one of the highest taxed countries with respect to petrol.
I am reliably informed that Government is being advised to seriously contemplate removing the nuisance “Special Tax” (GHc 0.46/litre) and the outdated “Price Stabilization” levy (GHc 0.16/litre). If done, we could see prices fall even lower than the expected GHc 4.00/litre to below GHc 3.50/litre.
Enacting these very doable reductions would be a relief to so many – remembering that nearly 80% of our population constitutes key workers who, in serving the public will have to embark on alternate (and more expensive) transportation means to keep themselves safe, as per social distancing guidelines.
Notes
· Note: a US Gallon is 3.875 litres whereas a UK Imperial Gallon – what is used in Ghana – is 4.5 litres.
· PBU is agreed to by all the players in the value chain – (Chamber of Bulk Distributors (CBOD), Association of Oil Marketing Companies (AOMC), Tanker Owners, and Tanker Drivers; collectively the sector players).
END
Signed
*Alex Mould*
30/03/2020
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