Petroleum Margins Surge by 1,326% in Six Years, ACEP Reveals

The margins applied to the consumption of petroleum products in Ghana have seen a cumulative increase of 1,326% between 2018 and 2024, says Kodzo Yaotse, Policy Lead for Petroleum and Conventional Energy at the Africa Centre for Energy Policy (ACEP).

The affected margins include the BOST Margin, Primary Distribution Margin (PDM), Fuel Marking Margin, and Unified Petroleum Price Fund (UPPF), which have increased by 350%, 257%, 300%, and 429% respectively during the period.

Speaking at a press conference on January 15, 2025, Mr. Yaotse expressed concerns over the lack of accountability mechanisms surrounding these regulatory margins, stating, “These margins, controlled by the National Petroleum Authority (NPA), have become a burden on consumers without clear economic justification.”

The UPPF Debate

The UPPF, designed to equalize petroleum prices across the country, was singled out for scrutiny.

According to Mr. Yaotse, the fund has become outdated, with local competition and operating costs now playing a more significant role in pricing than transportation costs.

“In theory, the UPPF promotes equity, ensuring that regions distant from ports do not pay higher prices than urban centers. However, in practice, prices in smaller regions are often lower than in Accra and other cities. This raises questions about the relevance of maintaining this fund, particularly when urban residents, already burdened by higher living costs, are effectively subsidizing fuel for less populated areas,” he said.

Political Influences and Inefficiencies

Mr. Yaotse suggested that political considerations rather than market efficiency drive the persistence of such regulatory margins.

He argued that a competitive market, anchored by effective regulation, would lower prices and improve service delivery.

“Instead of fostering competition, the current system enables politically connected firms to thrive while ordinary consumers bear the brunt of inefficiencies. The UPPF, for example, could be restructured or scrapped altogether in favour of market-driven pricing mechanisms,” he said.

The sharp increase in margins highlights broader concerns about the governance of Ghana’s petroleum sector, where opaque practices and limited accountability have long been contentious.

ACEP’s call for reforms underscores the need for a more transparent and consumer-focused approach to energy regulation in the country.

Source: norvanreports.com