Oligopoly at play in Ghana’s downstream?
An oligopoly is a market structure in which a marke or industry is dominated by a small number of large sellers or producers. In Ghana, the downstream petroleum market is dominated by five out of the 170 oil marketing companies accounting for 50 percent of the market share.
There is also the dominance of nine bulk distribution companies, representing 80 percent of fuel imports. The Chamber of Bulk Oil Distributors is the representative body for 36 bulk import, distribution, and export companies, seven storage depots, and three other affiliated petroleum service providers in the downstream sector.
Despite nine firms importing 80 percent of Ghana’s fuel requirements and insinuations that oligopoly is playing out in the sector, Mr. Senyo Kwame Hosi, CEO, CBOD, strongly rejected the suggestion.
He insisted that “fierce competition’ is driving the downstream sector to the benefit of consumers.
“There is no trace of any kind of duopoly, oligopoly or whatsoever in the market. The only time you have that is when government interferes through its state-owned entities,” he countered.
“The sense of competition in our industry is very fierce and in no way have consumers being short-changed.”
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Ben Boakye of Accra-based African Centre for Energy Policy (ACEP) sees the sector as somewhat opaque, especially the process leading to obtaining licenses and permits to become distribution firm. And he is also not impressed with the current price fixing mechanism.
“Prices are still negotiated. So you cannot always know how a bulk distributor bought a product. Because some get their products through various negotiations with suppliers, but the only way you can ensure that they pass those benefits to consumers is to allow the market to set the price and allow competition to shape how much price they want to sell it at the pump.”
Mr. Hosi, who voiced strong support for the current deregulation system however acknowledged that the market “is not optimal.”
High taxes and levies mean operators in Ghana pay more for fuel than in neighbouring countries.
“The issue for customers is whether the price they buy fuel is optimal. Today, as we speak, it is not,” he said.
