Fuel Prices To Go Up Again?

Even as Government surrenders to popular pressure to reduce fuel prices today, the prospect of an increase within weeks is threatening as the National Petroleum Authority would simply have to raise the prices even higher as price of the precious liquid is set to soar well over $100 a barrel and stay high, Chronicle research has shown.

US billionaire Jim Rogers a former partner of the internationally respected billionaire philantroph, George Soros has predicted that the commodity would not drop any lower for the next decade at least, meaning that countries like Ghana which is not an oil producing nation would be buffeted by more shocks.

“We’re going to have high oil prices for a very long time. The surprise is going to be how high it goes,” Mr. Rogers said.

Repeating his comments, Rogers noted “It will be much more than $100 before the bull market is over”.

In London, Brent North Sea crude for August delivery slid 23¢ to $73.75 per barrel in electronic trading.

Rogers has predicted the commodities bull run has at least 15 years to run.

“It’s a major long-term bull market as far as I’m concerned,” he was quoted by Reuters as saying.

Aside from the bullish impact of tensions, described by Rogers as temporary, over Iran’s nuclear ambitions and North Korea’s missile tests, he said oil was drawing long-term support from the lack of large scale finds.

Meanwhile, the British investment house Investec have also gone on record to say that the price of crude oil is likely to hurtle beyond $80 a barrel before the end of 2006. The London analyst said world crude prices – which have doubled in value over the past two years – also said prices could even strike $100 before the end of the year.

“I am sure we’ll see over 80 this year,” Bruce Evers of Investec said, It could hit $100 “if Iran refuses to co-operate with the US and there is a major hurricane over the producing area of the Gulf of Mexico”, he said.

In interviews over the weekend with Messrs Muhama Ayariga, John Attafuah and Nana Kofi Coomson, various opinions were offered on the subject.

Mr. Coomson noted that there must be a conscious and deliberate effort to prepare the minds of the Ghanaian public and instill in them a sense of shared responsibility for the unavoidable increase. He conceded that the opposition parties would quite naturally be cashing in on these difficulties even though they know that the increase would be the natural consequence of this bull run, ‘ and Joe, you would not begrudge them because it is exactly what the NPP did when they were in opposition’.

Coomson who said he is deeply concerned as a tax payer who has a staff of over 100 noted that his businesses are suffering and he is struggling to keep all his workers in employment, which required making sacrifices to keep his head above water: ‘If you ask anyone in the hospitality industry in the western region, at least, is tearing out his or her hair in anguish at shrinking bottom-line and escalating costs. I used to spend around c4 million a month on energy bills, now I am averaging c14 million and dare not push prices of my services up, else the market will punish me.’

‘I really think a bi-partisan approach should be adopted by parliamentarians, those in the majority and the minority to discuss this issue because we should all note that we are all Ghanaians who must think about Ghana first, and realise that the economy impacts directly on every Ghanaian, NDC, CPP, DFP, UGM, URP and NPP’ Mr. Coomson suggested that alternative energy options like, solar energy would be useful buy his research shows that even companies that have invested heavily in solar panels are being punished by the inefficiencies within the ECG system because they are not realizing any comparative advantage. He cited the 4-Star hotel Shangri La as an example of a hotel whose owners had installed solar panels as an energy conservation initiative but which was experiencing serious frustrations and zero benefits.

He noted that it is curious that some of those who are involved directly with the management of energy in the country are insulated from public political pressure, which would make them me more empathetic.

Continuing, he said two public figures whose names come to mind as directly responsible for such a political sensitive issues are not members of the ruling party and may probably feel less concerned with the political fortunes of the NPP in the light of the massive public concerns, Messrs John Attafuah, the boss of the National Petroleum Authority (NPA), who used to work at the Energy Ministry for some considerable period under Mr. Ato Ahwoi. The other is Dr. Charles Wereko Brobbey who with the NPA boss are the founders and promoters of the party that fought hardest to keep the NPP in opposition with their UGM party. ‘I do not believe that the NPP hierarchy would fall for any gimmick of re-admitting Tarzan (Wereko Brobbey) even if he feints it as he is reported to be planning to do’.

‘Wereko Brobbey’s area of expertise is really in solar energy, and on paper, he is brilliant workaholic, but in practice, I have serious concerns about him.

I shall be making my view about his new position as chairman of the board of the Ghana Venture Capital Fund public pretty soon because they are matters of grave national interest’..

Honourable Mahama Ayariga, 34, the ranking member of the Parliamentary Select Committee on Constitutional and Legal Affairs said “We have been vindicated. This is what we have been saying all this while but they seemed not to understand us”. Vindicated as well are some kingpins of the NPP, including Boi Laryea, John Boadu, Lord Commey, and Kenedy Agyepong, who protested vehemently about the petrol price increases although they received backlash from the NPP national chairman, Mr. Peter Mac Manu over their comments.

Hon. Ayariga stressed that for the teaming masses of Ghanaians to be saved from higher prices of these products if the price hit over $100 per barrel, the policy of using petroleum to mobilize revenue for the state must be reviewed. He called for the abolition of taxes on petroleum products that have adverse effect on the incomes of the ordinary Ghanaian and particularly suggested the scrapping of the Debt Recovery Fund Levy which is meant to pay TOR’s debts. “When prices are too high because of high fuel prices, consumption is reduced and it leads to stifled economic growth and development”. “We can not decrease the import parity price but we can reduce the taxes by looking at the tax element,” he reiterated. He opined that there are other several areas where if government can put much effort would compensate for abolished levies on petroleum products. He called for the widening of the tax net as well as the use of alternative sources of energy such the production of bio-diesel especially from the jethrofat plant. He said the problem with looking for alternative sources of energy is that it is long term. “As we look at the immediate ones, we should start with it now”. After the import parity or the Ex-Refinery price, the government currently according to a National Petroleum Authority has seven levies in-built in the price of petroleum products after the Ad-Valorem tax was abolished by the government just before parliament went on recess through a certificate of emergency.

The levies include Excise Duty Specific, Debt Recovery Fund Levy, Road Fund Levy, Energy Fund Levy, Exploration Levy, Social Impact Mitigating Levy and Cross-Subsidy Levy. Margins on the products also include primary distribution margin, BOST margin, UPPF margin, gross margin and in the case of LPG, filling plant costs and distribution compensation are added.

Meanwhile, the Chief Executive Officer of NPA, Mr. John Attafuah declared that his outfit has nothing to do with instituting levies on petroleum products as it was only parliament that can impose levies. He said it is the duty of the NPA to regulate, oversee and monitor activities in the petroleum downstream industry, to establish a Unified Petroleum Price Fund and to provide for related purposes such as protecting the interests of consumers and petroleum service providers. He explained that it is only one body that can adjust taxes on petroleum products and that body is parliament. “We implement taxes imposed by parliament”.

He however told this reporter that the new prices would not be announced until the NPA is officially written to by the ministry of Finance and Economic Planning informing it of the abolition of the ad-valorem tax. “We need an evidence of what has happened,” he added.

Asked whether it is illegal for OMCs to sell at the new price when the NPA had not announced the new maximum ceiling, the CEO said ‘no’, stressing that they must always sell below the maximum indicative prices.