There is a popular belief that certain Oil Marketing Companies (OMCs) sell superior fuel whilst others sell inferior ones. This assertion if I am to be charitable, will be granted one to two percent chance of probability.
A product specification is a list of properties which the product must possess to be acceptable to the customer or regulatory authority under which the supplier works. Here in Ghana, National petroleum Authority is the regulatory body that set the standards for the game.
In this article it is not possible to describe in detail the product properties nor the tests used to measure them as normally defined by specifications, only the most important items can be mentioned.
The specific gravity of a product is its density at 60°F which is divided by the density of water at the same temperature. It is often indicated as SG 60/60"F. This specific gravity is important when converting from volume to weight or vice versa.
Flash point determines the ease with which a product can be ignited when flame is applied to it. This test tells how safe it is to store and use a product.
Volatility takes care of the large number of different hydrocarbons and the required temperature in each phase of boiling point where we will have initial boiling (IBP) and final boiling point (FBP).
Sulphur Content are found in majority of oil products. Sulphur causes an obnoxious smell and it is very corrosive in nature. When you burn the fuel in your engine as a result of driving, it produces Sulphur oxides and renders your engine subject to early corrosion as a result of the moisture produced by your vehicle engine. It is harmful to the environment as well.
Enough of these technicalities! National Petroleum Authority(NPA) is in charge of ensuring that all these are done at least that is why you pay them on every litre of fuel you buy.
As a result, NPA has a maximum limit that every supplier ought to meet before supplying any product on the Ghanaian Market. Since 2017, importers are required not to supply any product above 50ppm (parts per million) however local refineries (TOR, AKWAABA AND PLATON) have been granted waiver by NPA since 2017 to produce Diesel and Petrol at a maximum of 1,500ppm.
What this means is that, importers supply high quality of fuel on to the market as compared to the ones refined in this country. Naturally, the cost of importers will be higher than the cost of local refineries due to quality differences.
In the supply chain, none of the players is allowed to brand product on the basis of quality because, both the higher quality and lower quality are allowed to comingle under one storage tank. Basically, you could have one particular depot hosting the products of TOR which is locally produced at 1500 ppm and the other imported products which bears 50 ppm all in the same storage Tank thereby, rendering quality play cards game irrelevant.
It is therefore imperative to verify the contribution of these local refineries thus, Akwaaba, TOR, and Platon on the market to see if indeed their less quality product on the market plays a major role at all.
In my last article which was published on myjoyonline and other reputable media outlets, I showed Tema oil Refinery’s abysmal contribution in the supply chain of our oil industry in the year 2019.
In the first quarter of 2020, it has gotten worse as they supplied zero product (Diesel and Petrol) on the market. A careful reading of the data reveals that TOR made an insignificant contribution of 0.35% on The Aviation Turbine Kerosene (ATK) market in the first quarter of 2020 whilst Blue ocean held the position with 65.99% followed by Juwel with 22.59% however, our focus here is on petrol and diesel that you and I frequently purchase at the fueling stations.
The graph below shows the performance of the Top twelve Bulk Distribution Companies (BDCs) in the first quarter of 2020 with respect to Petrol and diesel products.
All data was retrieved from NPA before processing to meet the purpose of this article. All figures are in litres. Interestingly, none of our local refineries who are allowed to operate beyond the threshold of 50ppm could be found on the above chart among the top suppliers of petrol and diesel.
It could be logically concluded that the products sold by all the oil marketing companies (OMCs) such as Nick Petroleum, Shell, Total, Goil, plus Energy, Frimps oil etc. are all product that has the 50ppm as a benchmark however, A further research which I carried out revealed that, certain OMCs such as SHELL, TOTAL and Nick petroleum irrespective of the industry requirement, further makes it a condition in their offers to all the BDCs to supply product that only bears the 50ppm benchmark.
This means that, the companies mentioned herein would not purchase any product from our local refineries since they are allowed to produce above 50ppm. This practice by Total, Shell, Goil and Nick Petroleum though gives a second comfort in ensuring quality of product at their pumps, must it command such premiums? I think not, this is because reading from the data, virtually every fueling station is selling a product bearing the 50ppm benchmark because the market is currently operated by suppliers who are under duty to supply only 50ppm products. All the fueling stations including the top guys such as Shell, Total and Goil are all buying from the same suppliers on the market.
Goil, Shell, Total and Puma are the players that command higher prices on the market whilst other companies such as Nick Petroleum, Benab Oil, Frimps and Zen Petroleum usually sell at a lower prices yet still, Goil, Shell and Total Petroleum in ascending order are still the companies that sells more products even after deregulation. One factor for the large sales of products in the face of higher prices by these giant companies are because of the many outlets, they possess as compared to the other minor Companies.
But there is another contributing factor, there are at times that you may have some of these Giant brands like Shell, with a higher price facing a nearby minor brand such as Nick Petroleum with a very low price, but you will have majority of consumers patronizing the product of this bigger brands.
The question then is, why are customers paying such premium for such brands?
One of the reasons is that, they perceive these brands to provide a quality product which I have demonstrated so far to be a fallacy based on the available data. Another reason is that Customers feel that they are likely to get the full quantity that they purchase without being cheated. Let me spend a bit of time on this assertion and why it may be a fallacy.
One thing we must note is that, most of the fueling stations we see outside are managed not by the brands such as shell, Goil or Total but rather independent individuals. Any person who has built a station can walk to any of the giant brands provided they meet the requirements set out by these brands to have their station branded in their name and start doing business.
You may choose to call it franchise. The brands usually do not commit much resources to ensuring that you are provided the exact quantity that you have purchased because, anytime that these big brands supply product to their franchisee, they immediately charge them the exact quantity they supplied.
Therefore, they play a little role in controlling the exact quantity the franchisees ought to discharge in your vehicles. In any other case, they have received the full value of what they supplied, the remaining is for the customer and the regulator to be vigilant so that any scrupulous franchisee does not cheat. This is how come in recent news you had a bigger brand such as Goil reported to have engaged in under delivery. In situations like this, mostly it is the franchisees who are behind this fraudulent act instead of the brand Goil (franchisor).
By far, we can say that the quantity you receive at the station is not so much dependent on the brand of the station in question but you and the regulator’s own vigilance.
A quick glance shows that these fueling stations; Goil, Shell and Total Petroleum appear to display the highest prices on the market as compared to minor fueling stations such as Nick Petroleum, Benab oil and Frimps with an average price differential of 0.10pesewas per litre.
Now this price differential seems insignificant however if you are to calculate it on the number of gallons you buy at the station, you will definitely appreciate how much premium you are paying on each brand. TO make up a gallon, you need 4.5 litres.
The table below shows by way of gallons how much you pay as brand premium for receiving no oil in your vehicle.
Gallons Litres Giant with firstname.lastname@example.org
1 4.5 GHC0.45
4 18 GHC1.80
6 27 GHC2.70
8 36 GHC3.60
10 45 GHC4.50
12 54 GHC5.40
For whatever reason, whether consciously or unconsciously, the commercial drivers who appear to be not well educated or mostly uninformed have realized this expenditure on their pockets and have decided not to be paying such premiums.
Majority of commercial vehicle users are very focus on the prices displayed by fueling stations as compared to private vehicle users.
Probably the notice of this premium by commercial drivers may be due to the constant use of fuel by them as compared to private vehicle users. It is entirely true that certain private vehicle users are also aware of this premium but prefers to pay for them due to certain unfounded perception.
As to whether or not the sustainability of this teasing competition could be guaranteed by most minor oil companies will require another fresh page that I may revisit on a different day.
Suffice to say that, even though we are in price deregulated regime, majority of the prices quoted by the minor companies are indeed unsustainable and mostly way below the belt. If these giants decide to join the tune being played by the minors, we would have majority of the minor oil companies folding up.
Goil at the start of the price deregulation in June,2016 indeed showed a little muscle that sent the oil minors companies going haywire with much complains. A lot of minor companies nearly collapsed until Goil decided to play gentle.
The minor oil companies are now showing their fragile teeth to the giants, it is my hope that the giants do not respond when their market share is bitten too hard by the Minor companies. The little advice is for the minors to bite what they can chew if not, danger awaits them.
All that is needed is for one lion (Giant oil companies) to scream and the Hyenas (Minor oil companies) would scatter. I can bet you that with a little scream from Goil, you will have Shell, Total put the game of competition to rest by burying these hyenas (minor companies). The economic effect such as unemployment is an immediate side negative effect.
What is your beef as a customer if a competition of such nature arises? Ah well, you have nothing to fear in the short term, however if these Giants have their way by clearing off these hyenas, you and I, are now going to deal with them without enough options. Majority of this Giants do not have motivation of operating in rural areas as they consider it not to be that much profitable. However, we have majority of this minor companies operating in our rural areas and their collapse will be a threat to nationwide energy supply.
Thankfully, Goil seems to have more footprints across the nation.
In the meantime, this is what the market is offering so take an informed decision anytime you are buying fuel and concentrate on the price differential.
I hope your eyes will be rolling anytime you are making a turn to any fueling station on the price displayed but don’t be too keen on the price board to cause an accident.