- Diesel Subsidy Softens Blow but Cannot Insulate Ghana from Global Oil Shock
Fuel prices in Ghana are expected to rise from today October 1, with diesel potentially reaching GH¢19.60 per litre, as renewed pressure from international petroleum markets combines with the cedi’s depreciation to increase import costs.
The Chamber of Oil Marketing Companies has projected increases in petrol, diesel and liquefied petroleum gas during the first pricing window of October.
Petrol could rise by as much as 3.31% to approximately GH¢17.91 per litre, while diesel is expected to increase by between 3.32% and 5.60%, potentially reaching GH¢19.60 per litre.
LPG is projected to rise by about 2.25% to GH¢17.06 per kilogramme.
The increases threaten to intensify cost pressures on households and businesses, even as the government extends its GH¢2-per-litre diesel intervention for another two months.
The latest arrangement restructures the relief rather than increasing it. Government will provide GH¢1 per litre by suspending the Energy Sector Shortfall and Debt Repayment Levy on diesel, while the remaining GH¢1 will come through a reduction in industry margins.
This means diesel consumers will continue to receive total relief of GH¢2 per litre during October and November. Under the previous arrangement, the entire reduction was absorbed through petroleum-industry margins.
The intervention may prevent diesel from rising even further, but COMAC’s forecast shows that subsidies can moderate external price shocks without eliminating them.
COMAC said the cedi depreciated by 1.27% to an average GH¢11.6321 to the dollar between September 12 and 26.
More significantly, the Chamber estimates that the currency lost 6.12% of its value during the third quarter, reversing part of the strong appreciation recorded earlier in the year.
That deterioration matters because Ghana imports most of its refined petroleum products in dollars. Even when international product prices remain unchanged, a weaker cedi raises the domestic cost of securing fuel.
The October outlook therefore highlights the close relationship between currency stability and prices at the pump. Ghana’s fuel market is exposed not only to crude-oil movements but also to changes in refined-product prices, shipping costs, insurance, supplier premiums and the exchange rate.
COMAC pointed particularly to continuing disruption linked to the Russia-Ukraine war and uncertainty surrounding international efforts to contain petroleum prices.
Russia’s restrictions on diesel exports have tightened an already constrained global market. Diesel prices can therefore remain elevated even when crude-oil benchmarks retreat, because refining capacity and product availability have become separate sources of pressure.
The National Petroleum Authority has also raised the price floors that oil marketing companies must observe during the first October pricing window.
The minimum petrol price has increased from GH¢16 to GH¢16.45 per litre, while the diesel floor has risen from GH¢16.77 to GH¢17.97. The LPG floor has moved from GH¢10.97 to GH¢11.10 per kilogramme.
These floors do not represent the final prices motorists will necessarily pay.
They exclude premiums charged by international oil-trading companies, the operating margins of bulk importers and distributors, and the margins retained by oil and LPG marketing companies. Those components will be determined by individual businesses under the petroleum-pricing formula.
The gap between the diesel floor of GH¢17.97 and COMAC’s potential pump price of GH¢19.60 reflects the additional costs that accumulate between importing the product and selling it to consumers.
Government’s decision to maintain the GH¢2 diesel relief could prevent a sharper price increase. Without it, diesel could move beyond COMAC’s forecast and closer to the levels projected by some consumer groups.
The intervention is particularly important for Ghana’s productive economy. Diesel powers commercial transport, construction equipment, mining operations, agricultural machinery and backup generators. An increase in its price spreads rapidly through transport charges, food distribution costs and the operating expenses of businesses.
But the structure of the relief raises questions about sustainability.
Suspending GH¢1 of the D-Levy reduces revenue intended to address energy-sector liabilities. The other GH¢1 is being absorbed through reduced margins, transferring part of the burden to businesses operating along the petroleum supply chain.
There are also concerns about outstanding payments owed to oil marketing companies for previous interventions. If those obligations accumulate, a measure intended to protect consumers could create liquidity problems for suppliers.
The central policy question is therefore not whether consumers need protection. It is how long broad fuel subsidies can be maintained without weakening energy-sector revenues, creating arrears or undermining the financial health of petroleum companies.
Ghana does not appear to face an immediate physical fuel shortage. The NPA said in September that the country had at least six weeks of fuel cover.
However, availability does not guarantee affordability.
BOST Energies has already reduced fuel exports to Burkina Faso and Mali to prioritise Ghana’s domestic requirements as global supply conditions tighten. Its managing director, Afetsi Awoonor, captured the problem succinctly: “Supply is available, but it’s at a high cost.”
That distinction is becoming increasingly important. Ghana may have access to sufficient petroleum products, but procuring them at elevated international prices while the cedi depreciates will continue to place pressure on consumers and the public finances.
For households, the latest adjustment comes at an especially difficult moment. Commercial transport fares have already increased, and another round of fuel-price rises could reinforce inflation through higher passenger fares, food-distribution expenses and production costs.
The GH¢2 intervention may keep diesel below the level it would otherwise have reached. But COMAC’s outlook demonstrates the limits of administrative relief in an import-dependent fuel market.
Unless the cedi stabilises and international refined-product prices ease, the government may face a recurring choice: allow more of the cost to reach consumers, sacrifice revenue to suppress prices or transfer the burden to petroleum companies.
October’s pricing window suggests Ghana is attempting to share that burden among all three. Whether the arrangement remains financially sustainable will become clearer long before the two-month intervention expires.
