The state-owned regulator of the downstream petroleum sector, the National Petroleum Authority (NPA) has organised a day’s workshop for journalists to sensitize them on price deregulation of products in the country.
Price deregulation, which started on July 1, 2015, is the removal of government control in the pricing of petroleum products and allowing market forces to determine prices.
The workshop, held at the NPA head office on Wednesday, brought together media personnel including business editors, senior journalists; and television and radio show hosts.
It afforded the journalists the opportunity to understand the involved in calculating the prices of petroleum products, and the rate at which they are increased.
Making presentation of the pricing formula for petroleum products, Head of Pricing at NPA, Mr Abass Ibrahim Tasunti pointed out that the unsustainable nature of subsidies and their impact on government finances delayed payment to importers of the product.
This, according to him, resulted in the inability of Bulk Import Distribution and Export Companies (BIDECS) to raise Letters of Credit to import the product, debt accumulation and shortages in the country.
He said to compelled government to introduce deregulation, allowing market forces to determine prices for the availability of petroleum products.
Mr Abass Tasunti explained that prior to the deregulation policy, NPA set and published the ex-refinery and ex-pump prices of all petroleum projects.
On the frequency of price review, the NPA Head of Pricing explained that there are two pricing windows in a month, which are from 1st -15th and 16th to the end of month.
He said prices are reviewed within these windows by the BIDECs and Oil Marketing Companies (OMCs).
Mr Abass Tasunti explained that the key components of the Price Build-Up (PBU), which lead to volatility in prices every window are the world market prices and the GHS/USD exchange rate.
“These two variables change every pricing window and depending on whether they go up or down, they lead to ex-pump price decreases or increases,” he added.
No politics in petroleum pricing
Welcoming participants at the workshop, the Chief Executive Officer of the NPA, Dr Mustapha Abdul-Hamid said, “you are very important as far as nation-building is concerned and to flip it you are very influential in nation destruction. This is why media people must be knowledgeable people which is why they say the pen is mightier than the sword. So if we have a media that is uniformed and uneducated then it is very dangerous.
“This is why the NPA as part of its mandate to regulate the petroleum downstream sector decided to engage the media on petroleum pricing in the country”, he added.
Dr Abdul-Hamid noted that since the country moved into full-blown deregulation it has stopped the attack on various governments as the principal agents who determine petroleum prices.
“I remember from 1992, then 1996, then 2000, then 2004, and then even 2008, where opposition parties would always hold a gallon in a rally and say that when we were in power, this was how much a gallon of fuel was being sold, and now these people have come and it is gone up, so we should kick them out….”
He said it had gotten to a point where the petroleum price doesn’t feature anymore as a major discourse in political contention, saying “Why? Because of one word – Deregulation.”
Dr Abdul-Hamid pointed out that the price of petroleum is now determined by the forces of demand and supply as well as international geopolitics among others.
He encouraged journalists not to make petroleum pricing a National Democratic Congress (NDC) or New Patriotic Party (NPP) issue as “petroleum pricing basically drives the economy, drives agriculture, drives the markets, productivity in workplaces and more. Everybody thrives on petroleum and so an educated journalism fraternity on petroleum pricing in a deregulated environment is very critical for the survival of our nation and the peace of our nation.”
Dr Abdul-Hamid promised to make the interaction with the media a regular occurrence.
NPA’s role in deregulation environment
NPA is mandated Act 691 (NPA Act 2005) ensure that BDCs and OMCs set prices in accordance with the prescribed petroleum pricing formula.
It is also to determine the price benchmarks BDCs must use in setting the ex-refinery price of each petroleum product.
Furthermore, the NPA provides the template that OMCs must use in the determination of their ex-pump prices for every window.
It also reviews Ex-Refinery prices and Ex-pump prices set by BDCs and OMCs before they implement them at the pump.
The regulatory body also conduct regular price monitoring exercises to ensure that retail outlets of OMCs and LPGMCs are not selling petroleum products to consumers above the prices set by their companies.
