Petrol Cheaper in USA than in Ghana

Comparing petrol prices across nations is always difficult, but despite daily headlines bemoaning record crude oil prices, Ghana is actually one of the expensive places to fill up in the world.

Ironically, out of 155 countries surveyed, US petrol prices are among the cheapest in the world, according to a recent study from AIRNIC, a research firm that tracks cost of living data.

The difference is staggering. As of early May, US petrol prices averaged $3.55 a gallon. That compares to over $5.50 a gallon in Ghana.

According to the AIRINC survey, some African countries where petrol sells cheapest include Swaziland (54 cents per gallon), Egypt (89 cents) and Seychelles (98 cents).

The US has always fought to keep petrol prices low, and the current debate among presidential candidates on how to keep them that way has been fierce. On the other hand, the Ghana government argues that it cannot subsidize the cost of petroleum products on the market since the revenue is needed to fund development projects in the country.

Although Ghana expects to start its own crude oil production within two years, President Kufuor says the oil import bill had leaped from $500-million in 2005 to $2,1-billion at the end of last year and was now moving to $2,5-billion, as prices kept rising.

Critics have persistently called on government to reduce the accumulation of huge taxes on the ex-pump prices of petrol, but this has often been dismissed. The argument from government is that ongoing projects would have to be suspended to be able to provide subsidy for fuel prices to cushion Ghanaians as advocated by a section of the public.

Gasoline (as the Americans call petrol) costs roughly the same to refine, no matter where in the world it is produced, according to John Felmy, chief economist for the American Petroleum Institute. The difference in retail costs, he said, is that some governments subsidize petrol while others tax it heavily.

In Ghana, the tax element of the retail price of petrol is about 13 different items.

In the US, the federal tax on petrol is about 18 cents a gallon, pretty low by international standards.

Many governments are under pressure to make tax cuts to offset the inflation associated with the high crude oil prices. That is why President Kufour’s recent announcement of a reduction in the tax component of some petroleum products has been hailed as a timely intervention to ease the pains of the vulnerable. Parliament Tuesday passed into law two bills presented by President Kufuor which are intended to provide tax reprieves to ameliorate the effects of rising global commodity prices.

Specified excise duty on gas oil was reduced from 9.1Gp to 6.2Gp; duty on kerosene from 6.4875Gp to 4.5375Gp; duty on marine gas oil from 6.4945Gp to 3.9945Gp, while the current duty of 5.1456Gp on premix fuel is being completely removed.

The World Bank Country Director, Ishae Diwan thinks the soaring prices of food and crude oil attracted the right response from the government, though subsidy measures announced by the President should not be the long term solution. The Bank itself has announced an additional US$20 to Ghana to be split 50-50 to cushion the vulnerable against soaring food prices and short term investment in agriculture.However, the European Commission says there is not much it can do about the rising oil prices and their knock-on effects. It leaves it to individual countries to decide how much tax they put on oil.

Countries across Africa, including Ghana, Kenya and Nigeria, have reported inflation swelling alarmingly under the food and fuel price pressures. Some countries, such as Ghana, have moved to raise interest rates to try to control inflation. Others, in Burkina Faso, Guinea and Mauritania, face strike threats from unions pressing for salary increases to compensate the price hikes.

As indicated earlier, it is always difficult to compare petrol prices across nations. For starters, the AIRNIC numbers don’t take into account different salaries in different countries, or the different exchange rates.

The dollar has lost considerable ground to the euro recently because oil is priced in dollars, rising oil prices are not as hard on people paying with currencies which are stronger than the dollar, as they can essentially buy more oil with their money as the dollar falls