IES defends price floor policy, calls NPA to investigate Star Oil

The Institute for Energy Security (IES) has opposed calls to abolish the National Petroleum Authority’s (NPA) fuel price floor policy, describing it as crucial for safeguarding fair competition in Ghana’s downstream petroleum market, even as pump prices continue to fall.

Recent drops in global oil prices, combined with the relative stability of the cedi, have led to successive reductions in fuel costs at the pumps. However, some Oil Marketing Companies (OMCs), including Star Oil, argue that the price floor prevents them from passing on even deeper cuts to consumers.

Responding in a statement, IES clarified that the price floor was never intended to fix prices, but to prevent predatory pricing practices that could drive smaller OMCs out of business.

The think tank also dismissed claims by Star Oil that petrol could be sold for as low as GH¢9.50 per litre during off-peak hours, insisting that retail costs remain constant regardless of the time of day.

Fuel could sell for GH¢9.50 without NPA price floor - Star Oil CEO hints.

“The NPA price floor was introduced as a competition-stabilising mechanism, not as a price-fixing tool. The suggestion that an individual OMC could selectively reduce prices during specific hours (e.g., 10 p.m.–4 a.m.) raises serious regulatory and competition concerns,” the statement read.

“Fuel retailing is not a digital service where marginal costs disappear at night; storage, financing, distribution, and inventory risks remain constant. If an OMC claims it can sustainably sell below the regulatory floor, this raises legitimate questions: Are such prices below economic cost? Are losses being cross-subsidised to crowd out competitors? Would smaller OMCs survive such a strategy? What happens to prices once competitors exit the market? These are precisely the market failures the price floor is designed to prevent,” it added.

IES called on the NPA to investigate Star Oil’s pricing claims, ensure compliance with existing regulations, and reaffirm the rationale behind the price floor to protect consumers and maintain market stability.

The institute also cautioned that removing the price floor could trigger unregulated competition, allowing dominant players to undercut rivals, which may ultimately lead to market concentration, supply disruptions, and higher prices in the long run.

Earlier, Philip Tieku, Chief Executive Officer of Star Oil Ghana, disclosed that his company could have sold petrol at GH¢9.50 per litre during off-peak hours to support night-time demand.

However, he lamented that the plan is impossible under the NPA’s price floor policy, which sets a minimum price below which fuel cannot be sold.

Tieku argued that the floor undermines free-market competition in Ghana’s deregulated petroleum sector.

SA/MA