AOMC marks six years of deregulation of petroleum pricing

The Association of Oil Marketing Companies (AOMC), has marked six years of the deregulation policy of petroleum product pricing in the country, which started fully on June 15, 2015.

Mr Kwaku Agyemang-Duah, AOMC Executive Director explained that the issue of the pricing of petroleum products had dominated public discourse and policy contestations for years as the difference in opinions focused on subsidy removal, deregulation, or appropriate pricing.

He emphasised that the pricing of petroleum products such as petrol and diesel in Ghana had experienced abnormal hikes, thus, the introduction of the deregulation policy and its implementation to help stabilize price hikes.

Mr Agyemang-Duah who is also the AOMC Industry Coordinator stated at the third, “End of Month Stakeholder Engagement and Workers Appreciation Day,” seminar organized by the Ghana News Agency Tema Regional Office which is a platform rolled out for state and non-state actors to address national issues.

The event also served as a motivational mechanism to recognize the editorial contribution of reporters towards national development in general and the growth and promotion of the Tema GNA as the industrial news hub.

Speaking on: “Six years after petroleum price deregulation: analysis of

impact on omc’s and the economy,” he said, the process to deregulate the pricing of petroleum products kept evolving until June 2015 where fuel prices were completely deregulated and managed by Bulk Distribution Companies (BDCs) and Oil Marketing Companies (OMCs) under supervision of the National Petroleum Authority (NPA).

He said attempts were made to liberalize fuel prices with the introduction of automatic price setting but it hit a snag and eventually, a price formula was brought back in 2005 and NPA was set up by the passage of the NPA Act, 2005 (Act 691) to oversee the deregulation of the sector.

He said the NPA was in charge of pricing fuel until 2015 when the phase evolved to OMCs importing and pricing fuels on their own, adding that the NPA still monitors overall operations by setting price ceilings for OMCs to work within.

Mr Agyemang-Duah said: “the introduction of the deregulation policy by the government was to reduce the huge debts government owed OMCs which deprived OMCs the capital needed for effective and sustainable business operations.

“If you will recall, we as citizens were enjoying the subsidies but the government was unable to pay the BDCs; that resulted in shortages and vessels didn’t come because petroleum cargo couldn’t be pre-financed”.

That, he added, led to a discussion to deregulate the system with accompanying debt overhangs, leading to the introduction of the Energy Sector Levies Act (ESLA) to service debt securities and related expenses.

According to him, in the deregulation, it was expected that the OMCs would compete intensely and prices of products would fall, but in a regulated environment, however, prices were fixed by the NPA and the margins of OMCs were also fixed.

The deregulation of petroleum product prices, and hence the removal of fuel subsidy in the country implied that people would pay the actual price and this would eliminate distortions in the market, and increase efficiency.

Hence, he indicated that “there is a scheduled price build-up which you cannot depart from; this contains the ex-refinery price (the wholesale price), taxes and levies, and the OMC margins; this then becomes the price.”

The AOMC Executive Director said the deregulation police had a primary objective to put an end to government subsidies on crude oil and petroleum products geared towards sanitizing the country’s petroleum sector.

The third edition of the GNA-Tema monthly stakeholder engagement was attended by the National Commission for Civic Education, the Tema Regional Command of the Ghana Police Service, the Ghana Ports, and Habours Authority, and the Association of Marketing Companies (AOMCs) amongst other dignitaries.