- International Market Shocks Driving Ghana’s Fuel Price Increases — COMAC
The recent increases in fuel prices in Ghana are being driven principally by developments on international petroleum markets rather than higher profit margins imposed by oil marketing companies, according to the Chamber of Oil Marketing Companies.
Dr Riverson Oppong, chief executive of COMAC, said criticism of fuel retailers overlooked the structure of Ghana’s deregulated pricing system, under which the largest part of the pump price is determined before products reach individual filling stations.
The cost of importing refined petroleum products, movements in international benchmark prices, freight charges and the exchange rate exert a far greater influence on pump prices than the margins retained by oil marketing companies, he said.
The intervention comes amid growing concern among motorists, transport operators and businesses over another round of fuel-price increases and the potential impact on transport fares, production expenses and consumer inflation.
Ghana’s petroleum pricing formula consists broadly of the ex-refinery price, statutory taxes and levies, and operational margins across the downstream value chain. COMAC has previously said the ex-refinery component is shaped by global free-on-board prices, supplier premiums and freight costs, while taxes and levies are imposed separately by the state.
Dr Oppong argued that oil marketing companies operate at the final stage of a supply chain in which much of the product cost has already been established.
International oil traders and bulk import, distribution and export companies procure products using global benchmarks and US dollar-denominated contracts. Any rise in refined-product prices or depreciation of the cedi therefore raises replacement costs before the fuel reaches retail outlets.
Oil marketing companies must then add the operational and dealer margins needed to transport, store and sell the products, but those components account for a relatively small proportion of the final price.
Dr Oppong has previously estimated that approximately 70.00% of the pump price goes towards bulk supply costs, while taxes and levies account for about 20.00% to 27.00%. Oil marketing companies are typically left with between 3.00% and 5.00%, he said.
The industry’s position challenges suggestions that fuel retailers are using international market volatility to widen their margins at the expense of consumers.
COMAC said the competitive structure of the downstream market makes it difficult for individual operators to impose excessive increases without risking the loss of customers to lower-priced rivals.
Ghana has more than 200 oil marketing companies, creating intense competition for market share. Larger operators may be able to sell at lower prices because they distribute greater volumes and benefit from lower unit costs, while smaller companies require stronger margins to cover infrastructure and operating expenses.
The differences in prices displayed by retailers therefore reflect business scale, inventory costs, location and operational efficiency, rather than necessarily indicating profiteering.
The latest price pressures also underline Ghana’s continued dependence on imported petroleum products.
Although the country produces crude oil, a substantial share of the petrol and diesel consumed domestically is imported in refined form. That leaves local prices exposed to global product markets, shipping costs and exchange-rate movements.
Dr Oppong has warned that periodic pump-price increases will remain difficult to avoid for as long as Ghana continues to rely heavily on imported fuel. Even countries with domestic refineries remain connected to global pricing because crude oil and refined products are internationally traded commodities.
The removal of a temporary government-industry intervention in June has made pump prices more directly responsive to international market developments.
COMAC said the intervention, which had cushioned consumers against sharp global increases, was fully removed for petrol and diesel from June 16. Prices subsequently returned to reflecting international product costs, exchange-rate movements and the full range of taxes, levies and regulatory margins.
The restoration of the full pricing formula means consumers are likely to experience more immediate movements in pump prices when global markets change significantly.
COMAC has also argued that oil marketing companies are exposed to losses when prices move rapidly in either direction.
Retailers may import or purchase stock at a relatively high price only for international benchmarks to decline before the product is sold. Because companies must respond to lower market prices to remain competitive, they can be forced to sell older stock at reduced margins or at a loss.
Dr Oppong said declining prices could sometimes be more damaging to industry operators than increases because companies are left holding expensive inventory that must compete with cheaper replacement products.
The industry has consequently rejected the assumption that every increase automatically translates into higher profits for retailers.
Rising international costs can also compress margins where companies delay passing the full increase to consumers or where competition prevents them from adjusting prices immediately.
The volatility has been intensified by geopolitical uncertainty in the Middle East, which has contributed to sharp movements in crude and refined-product prices and increased concern about supply disruptions.
COMAC said Ghana’s fuel market would remain vulnerable while geopolitical developments continued to affect global petroleum supplies and shipping routes.
For consumers, however, the distinction between international costs and local margins does not reduce the immediate burden of higher pump prices.
Fuel-price increases affect commercial transport, freight, agriculture, manufacturing and electricity generation for businesses dependent on diesel-powered equipment. They can therefore spread beyond filling stations into food prices, transport fares and the wider cost of living.
The policy question is whether the government can reduce that exposure without creating unsustainable fiscal costs or weakening the institutions responsible for maintaining the fuel-distribution system.
Previous interventions have relied partly on reducing operational and regulatory margins rather than cutting petroleum taxes. COMAC warned that such measures transferred financial pressure to oil marketing companies, bulk distributors and public agencies carrying out fuel distribution, marking and price-equalisation functions.
A more durable response would require stronger domestic refining capacity, exchange-rate stability, transparent taxation and mechanisms for managing international price shocks without destabilising downstream operators.
COMAC’s defence of the industry does not suggest that margins should escape regulatory scrutiny. Rather, it argues that the public debate should distinguish the relatively small retail component from the international and fiscal costs that make up most of every litre sold.
As long as Ghana imports much of its refined fuel and prices those imports in US dollars, movements in global markets will remain the dominant force at the pump.
For consumers, that means domestic competition can limit differences between retailers, but it cannot insulate the country from the cost of international oil shocks.
