Turn Petroleum Margins into Taxes for Development Agenda – ACEP Appeals to Government

The African Center for Energy Policy (ACEP) has called on the newly formed government to urge Parliament to ratify legislation that will convert all margins on petroleum products into taxes to fund priority development projects across the country.

According to a study, consumers in Ghana currently pay about 7 cents GHS (1.16) per liter for local distribution, compared to 5 cents per liter for freight and insurance costs to ship diesel from Europe to Ghana.

During a press conference in Accra on the issue of fuel pricing in Ghana, Kodzo Yaotse, Policy Lead for Petroleum and Conventional Energy at ACEP, highlighted key findings regarding the distribution and margins applied to petroleum products. He explained that the Primary Distribution Margin (PDM), which is intended to cover depot-to-depot transportation costs, continues to be levied even when Bulk Oil Storage and Transportation (BOST) facilities are not in use.

Yaotse pointed out that the PDM generates over GHS 1.2 billion annually, yet more than 50% of petroleum products are distributed outside of BOST facilities, raising concerns about the justification for this levy.

Between 2018 and 2024, the BOST margin, PDM, fuel marking margin, and the Universal Petroleum Pricing Fund (UPPF) saw significant increases, with the BOST margin increasing by 300%, the PDM by 247%, the fuel marking margin by 350%, and the UPPF by 429%. Yaotse also questioned the rationale behind the UPPF, which was originally imposed to ensure uniform petroleum prices across the country. He noted that political settlements appear to be influencing the persistence of the UPPF, as there is no evidence suggesting that its removal would lead to higher fuel prices in remote areas.

Further revealing details from documents provided by the National Petroleum Authority (NPA), Yaotse said the contractor responsible for fuel marking received only about half of the over GHS 400 million in annual margin revenues collected from consumers through a sole-sourced procurement arrangement. Between 2019 and December 2023, this sole-sourced contract for fuel marking was renewed five times, each for short durations ranging from two to six months. Yaotse also highlighted that the proprietary chemical agent used for marking fuel had ended up in the hands of fuel smugglers.

In terms of BOST’s margin, Yaotse noted that BOST receives a GHS 12 margin per liter of petroleum, intended for the maintenance of its operations, primarily to maintain strategic stock. However, he revealed that BOST has never performed this function effectively. In recent years, BOST has shifted towards a more commercial outlook, competing directly with private sector players in the importation and sale of petroleum products. Through its Gold for Oil program, BOST now controls about 20% of the petroleum import market, further deviating from its original mandate.

Yaotse emphasizing the urgent need to review and restructure petroleum levies to ensure they align with the interests of consumers and contribute meaningfully to national development.

By Madjid Diallo || GhanaNewsOnline