Petroleum Product Prices To Go Up

Prices of petroleum products could go up soon as world oil price hit US$34 per barrel, last week, the highest in a decade.

This may compel government to increase prices of fuel contrary to its earlier intension to stabilize the price of the products. Already, senior government officials have hinted that the issue of further adjusting fuel prices is inevitable should the hike persist to avoid plunging the Tema Oil Refinery (TOR) into further debt.

Though not conclusive, early indications are that should the price of oil continue to rise, the NPTB will have to increase the price of petroleum products further to meet operational expenses of the national refinery, currently sailing out of financial trillions downturns experienced two years ago.

In making its estimates and forecasts for the year, government pegged the world price for oil at US$32, but recent development has forced prices upwards recording US$2 above government?s peak.

Sources close to TOR have indicated that the company cannot cope with the increase for long. The company spends over US$100 million routinely on oil imports, but the rate (US$34) is more than what the company anticipated at the beginning of the years.

Even though the country has increased its fuel strategic reserves for about two weeks, the price-fixing fomula ought to be applied to install sanity in the industry.

In line with the Petroleum Debt Recovery Levy Fund act, (Act 642) aimed at achieving full cost recovery and also to pay the debt, NPTB is mandated to implement the automatic adjustment scheme. The NPTB was formed in 2003 to administer the automatic price adjustment programme independently at the ministry of energy.

Meanwhile, the National Petroleum Planning Committee is about to submit its planned programme for the de-regulation of the sector.

Amidst intense controversy government is unwilling to allow petroleum products to be increased since this could have adverse consequences on its budget forecasts, with dire economic consequences, that threaten macro-economic targets.

Already cabinet has approved of a plan to restrict the operations of TOR from engaging in the importation of refined petroleum products. This activity, according to government sources, is to be carried out by Oil Marketing Companies (OMCs). But TOR still has monopoly over imports of oil.