Deregulation bolsters oil marketing sector

Deregulation has bolstered operations of the Oil Marketing Companies (OMCs) but government needs to roll-out phase two of the process to allow OMCs fix prices based on geographical location, Mr Henry Akwaboah, an industrial expert, has said.

He noted that the National Petroleum Authority (NPA) must allow OMCs to quote different prices at different filling stations they deal with especially in the rural areas and deprived communities.

Mr Akwaboah, the Managing Director of Engen Ghana Limited, in an interview with the Ghana News Agency, described the operations under the deregulated regime over the past year as a mixed-package.

“It has created an unprecedented price war regime, undercurrent maneuvers to sallow smaller OMCs, and unstable posture of consumers.

“Competition has become very intense within the BDCs market space because of differences in prices depending on the sources of import by the BDCs. This has helped the OMCs to bargain well and to purchase more from those with better ex-refinery prices.

“All OMCs are under consistent pressure over the past year to maintain good prices at the filling stations and also to keep their heads above water. Consumers are now sensitive to the fortnight changes,” he said.

The Regulator, the NPA, started the implementation process of petroleum product price deregulation on June 16, 2015. The OMCs are requested to announce their ex-pump prices for petroleum products and display same at their retail outlets.

The NPA has since been monitoring the application of the Prescribed Petroleum Pricing Formula to ensure that all petroleum service providers apply the formula in the right way.

Mr Akwaboah said the deregulation of the petroleum sector had been on the drawing board of various governments in Ghana for decades but the fear of implementation had now been buried totally by the current Government.

He noted that the un-sustainability of debt owed by government to the Bulk Distribution Companies (BDCs) was a clear indication of the need to deregulate the petroleum sector.

“The debt owed to BDCs continued to pose liquidity challenges for the BDCs resulting in supply constraints and thereby creating shortages and smuggling of petroleum products.

“The deregulation is important not only to clear the outstanding debt of government to the BDCs but to also ensure that government no longer subsidises the cost of fuel,” Mr Akwaboah said.

He said the deregulation had also helped to improve relationships and buried unnecessary suspicions by the BDCs and OMCs in respect of the price build up.

Since the deregulation started the BDCs had given the OMCs very tight credit periods within which they are expected to sell and pay. Some of them provide good discounts to the OMCs willing to pay cash on demand.

Mr Akwaboah said the competition among the BDCs and OMCs had led to reduction in margins and, therefore, lowered prices for final consumers of petroleum products.

He said Engen Ghana had adopted innovative measures which aimed at offering customers value for money in terms of lower prices, high quality service, and right quantity of product for customers.