Fuel Subsidy In Ghana. Is It Real, A Myth Or A Hoax

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• lovinda 12 years ago

  Hi.
  my name is lovinda please
  contact me with my email
  address.( lovinda_nelson@yahoo.com )
  form lovinda.

  Hi.
  my name is lovinda please
  contact me with my email
  address.( lovinda_nelson@yahoo.com )
  form lovinda.

  reply
• Nash 12 years ago

  Please can you explain what the huge tax breaks given to oil companies in US is. Because in the US this same argument is being used by the oil companies that if the government take aways the taxes breaks then the petroleum pr ...
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  Please can you explain what the huge tax breaks given to oil companies in US is. Because in the US this same argument is being used by the oil companies that if the government take aways the taxes breaks then the petroleum prices paid by consumers will go higher than it is now $3.99 and $4.05 depending on where you are, even it is now more than $5.00 in California.
  So tell us is this tax break not a subsidy in the US since the US Treasury is foregoing this tax revenues.
  This is the bone of contention between democrats and republicants in the US senate and congress and the Obama administration.

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• DAN 12 years ago

  oil companies are making 200% profit every year in america while the citzens are bankrupt! Can you afford to put $60 worth of petro in your truck every week like i do??? and we only pay $3.79 per gallon (4 liters)...Www.NewYo ...
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  oil companies are making 200% profit every year in america while the citzens are bankrupt! Can you afford to put $60 worth of petro in your truck every week like i do??? and we only pay $3.79 per gallon (4 liters)...Www.NewYorkGasPrices.com go look for youself you anus licker!

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• Nyansa Ba 12 years ago

  People in Government always think the people are perpetually stupid. Any time they want to increase the price of fuel, they will say they are going to remove the subsidies. They will go ahead and remove the 'mythical' subsidi ...
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  People in Government always think the people are perpetually stupid. Any time they want to increase the price of fuel, they will say they are going to remove the subsidies. They will go ahead and remove the 'mythical' subsidies and increase the prices. The following year, when they want to hike the prices again, they come with the same excuse - subsidies must be removed. How do the subsidies which were removed the last time get back to be removed again? Next year, if they want to increase fuel prices, they will again say they are going to remove subsidies. My God, these corrupt and visionless politicians must know we are not morons!

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• Okunka 12 years ago

  Remember that a US Gallon is 3.875 liters whereas an Imperial Gallon (used in Ghana and UK) is 4.545 Litres

  Remember that a US Gallon is 3.875 liters whereas an Imperial Gallon (used in Ghana and UK) is 4.545 Litres

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• Fo. Kwaku - Tanyingbe 12 years ago

  WE MUST PAY REALISTIC PRICES FOR WHAT WE USE. NOTHING IS FREE IN THIS WORLD
  
  Fo Kwaku - Tanyingbe

  WE MUST PAY REALISTIC PRICES FOR WHAT WE USE. NOTHING IS FREE IN THIS WORLD
  
  Fo Kwaku - Tanyingbe

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• DAN 12 years ago

  $3.79 pr gallon (4 liters)...You are paying for the free petro given to MPs and cars given to mp and Since Nobody works or pays income tax in Ghana all tax come from petro or imports at Tema!

  $3.79 pr gallon (4 liters)...You are paying for the free petro given to MPs and cars given to mp and Since Nobody works or pays income tax in Ghana all tax come from petro or imports at Tema!

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• Mr. Oushuuuuu 12 years ago

  Its a big big big hoax!!!!!!

  Its a big big big hoax!!!!!!

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• Mr. Oushuuuuu 12 years ago

  How much subsidy do we have on a gallon of petrol?

  How much subsidy do we have on a gallon of petrol?

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• Paul Amuna 12 years ago

  Thank you Solomon for enlightening us in such a clear and detailed way. I thoroughly enjoyed your article and hope that others will find it as informative and revealing.

  Thank you Solomon for enlightening us in such a clear and detailed way. I thoroughly enjoyed your article and hope that others will find it as informative and revealing.

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• Okunka 12 years ago

  Solomon, I have read your article and find your analysis intriguing. However, I wished you had only stated the facts for people to the their own judge rather than try to sway people.
  
  Let's get to the facts:
  Fuel other US ...
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  Solomon, I have read your article and find your analysis intriguing. However, I wished you had only stated the facts for people to the their own judge rather than try to sway people.
  
  Let's get to the facts:
  Fuel other US ( depending which State u are in ranges from USD3.90/US Gallon (Georgia ) to over USD5.00 in Calfornia;
  Fact #2. The Imperial Gallon we use in Ghana is about 1.173x larger than the US Gallon so that means Petrol in Georgia is 4.57 USD per Gallon and in California it is 5.8645. And these are today's prices ; it is always good to have information that compares like to like - it is always best to call people in these places to verify like I am doing.
  
  The NPA AgCEO mentioned that although the pump price is 2.05 GHC per Litre i.e. 9.225 GHC per gallon or 4.855 USD per gallon, the actual price paid to the suppliers, the taxes and the distributors comes to 2.21 GHC per Litre or ghc10.03 or usd5.28 per gallon.
  
  Import parity is not the price paid in Europe or the US. It is the price we will pay if we imported the product from a market that supplies our region; it includes the cost of the product at that market, the cost of freight and insurance, the cost of all local costs from port charges , finance costs, storage, pipeline and port cost.
  If anyone can get products cheaper from any other market, they will do so as the importation is opeto over 15 BDCs as well as TOR.
  
  On the depreciation of the cedi I was quite astonished on the arithmetic errors made. The cedi depreciated by over 23pct from 1.54 to 1.90 and this can only be offset if prices of crude oil dropped from the USD120 per barrel u used to about 93 per barrel; pls do the arithmetic. So this depreciation is a contributing factor to the increase we pay for petrol as we pay in cedis ; and the cost of oil per barrel is in the USD115. - 118/ barrel range over the last 2 weeks.
  On the issue of whether there is a subsidy or not, it is quite simple.why do we sometimes have no stock and why do we have queues if thes is so lucrative to the bulk importers??. If the total cost we pay at the pump to the supplier and the people who are in the distribution chain is less what it cost them to deliver the product they will not bring the product in. We have over 15 bulk importers plus TOR so it will be difficult for cartelism; or maybe they areall colluding with govt to cause shortage it he country? What would govt's incentive be?
  
  It is high time we all do some serious analysis and try to get the facts right to support what ever argument we are putting forward. Me for one I will be asking the NPA to publish the details of the Price Build up formula and the inputs that go into it watch week so that Ghanaians can see and judge for themselves who is telling the truth.
  
  We need more education for this and it is for this , Solomon, I am grateful to you that you began this discussion albeit your analysis seems quite flawed.

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• C.Y. ANDY-K 12 years ago

  Okunka,
  
  Thanks for your comments. I have some on yours too.
  
  I see it as more of nit-picking than addressing the issue of whether there is a subsidy or not, the thrust of Efo Solo's article.
  
  Yes, there are variations ...
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  Okunka,
  
  Thanks for your comments. I have some on yours too.
  
  I see it as more of nit-picking than addressing the issue of whether there is a subsidy or not, the thrust of Efo Solo's article.
  
  Yes, there are variations in gas (petrol) prices across America, as with different filling stations in even London! Even minimum wage varies here in the UK with age being the determinant, with some getting less than the adult current rate of £6.30 per hr! A complex comparison as in qs can only therefore use averages, or the most commonly occurring variables.
  
  Of course, I am sure Efo Solo is aware that the Imperial Gallon is bigger than the US gallon. Everybody who used the Oxford Dictionary (it is part of the Index) in secondary school and other math tables in Ghana should know that! Often found in diaries too!
  
  Your addressing the main qs of whether there is a subsidy or not is like a muddle! It'd make the Chief Priest of the Delphic Oracle proud for its ambiguity. Anyway, find below one contribution by Prof. Amegashie in response to the same article. His contribution with equations I even found very booklong and migraine inducing Maths 101, so I won't spread that migraine to Ghanaweb readers by hijacking it too post here.:-)
  
  Since Kwesi Botchwey started this "we are removing subsidy thing, and Ghanaians would pay the market price," only for them to refuse to reduce prices when crude price dropped very low in the '90s, with the ruse of paying the windfall into a Road Fund, Ghanaians have been at the receiving end of the charade!
  
  Here we go:
  
  www.iisd.org/gsi/sites/default/files/strategies_ffs.pdf
  
  According to “Strategies for Reforming Fossil-Fuel Subsidies: Practical lessons from Ghana, France and Senegal”
  
  The government of Ghana “… used a pricing formula again, this time to be administered by a new National Petroleum Authority (NPA). …. The reasoning behind the pricing formula was made transparent through publication of the components of the price of gasoline at the pump (Amoatey, 2006):
  
  • 53 per cent was the cost of purchasing and processing raw crude;
  • 10 per cent was Excise Duty;
  • 8 per cent represented the dealer’s and marketer’s profit margins;
  • 8 per cent went to the Debt Refinery Levy, to pay the Tema Oil Refinery’s debt;
  • 7 per cent went to the Road Fund Levy, to pay for road maintenance;
  • 6 per cent went to the Cross-subsidy Levy to maintain cheaper prices for kerosene, LPG and several other fuels;
  • 5 per cent went to the Deregulation Mitigating Levy, to minimize the impact of increased prices on the poor;
  • 2 per cent went to the Unified Petroleum Fund, which helps distribute petroleum fuels to rural areas; and
  • 1 per cent went to pay for Ghana’s six-week emergency reserve petroleum supply.”
  
  Note that 6 per cent went to the Cross-subsidy Levy to maintain cheaper prices for kerosene, LPG and several other fuels. So petrol was not subsidized. Instead, it was taxed to subsidize LPG and Kerosene. According to the weblink above, “Cross-subsidization refers to the practice of using profits generated from one product or service to support another provided by the same operating entity (OECD, 2002). In Ghana’s case, the government taxes automotive gasoline at a higher rate than other fuels in order to use these profits to reduce the prices of gas oil (diesel), kerosene, LPG, premix (a type of gasoline for fishing boats), marine diesel and residential fuel oil.”
  
  “Despite the decline in world prices after July 2008, energy prices became a campaign issue during the 2008
  elections in Ghana. The then-opposition party, the National Democratic Congress (NDC), promised to reduce fuel prices if it came to power. In early 2009, having won the election, the NDC fulfilled its election promise by reducing fuel taxes. By March 2009 fuel prices in Ghana were more than 45 per cent below corresponding fuel prices in neighbouring countries, leading to a dramatic increase in fuel consumption and smuggling out of the country (The Chronicle, 2009).”
  
  Note that it did not say that subsidies were removed. Instead fuel taxes were reduced.
  This was the government's statement on the recent price increase as reported by myjoyonline (my comments after the article)
  
  www://business.myjoyonline.com/pages/news/201302/101488.php
  
  "Government has announced a 15 to 20 per cent hikes in fuel prices.
  
  Per the new prices petrol will now be sold at GHS9.22 up from the previous GHS7 cedis.
  
  A statement signed by the Chief Executive of the National Petroleum Authority Alex Mould says the new prices will take effect from Sunday, February, 17, 2013.
  
  "The maximum indicative price for a litre of petrol will be GHS 2.0496 (GHS9.22 per gallon) and the maximum indicative prices for a litre of diesel will be GHS2.0683 will (GHS9.31 per gallon)" the statement said.
  
  Kerosene is also up by 15 per cent and will be selling at 104. 65 pesewas per litre.
  
  LPG is also up by 50 per cent and will be selling at 194.85 per litre or GHS24.36 per a 12.5 kg cylinder.
  
  The statement said the new prices are based on the crude oil price of $116 per barrel and an exchange rate of GHS1.89/USD.
  
  It the said the workout above indicates that government has maintained some subsidy on the prices of petroleum products."
  
  There is nothing in the statement above to support the claim that there is a subsidy. But be that as it may, note that they did not say that there is subsidy on petrol. They said there is a subsidy on petroleum products: petrol, LPG, Kerosene. It is likely that petrol is not subsidized; I think it is not. Instead, it is taxed to subsidize LPG and Kerosene. This will be a subsidy on LPG and Kerosene if there are no taxes on them."
  
  So ended the long post by the Prof. It is up to the govt to clarify what they are actually subsidising if, as clearly shown, petrol is not being subsided! With LPG increased by 50%, what subsidy is still on it? And for kerosene????
  
  These guys shld stop trying to hoodwink Ghanaians.
  
  Andy-K

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• JH-New York City 12 years ago

  Is this writer Kwawukume my friend,whom I worked with briefly at then biggest Industrial Complex in Africa (GIHOC) at Tema ?. Anyway, thks for Ur comprehensive,insightful and interesting article.(Tres bien) Facts are, Ministe ...
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  Is this writer Kwawukume my friend,whom I worked with briefly at then biggest Industrial Complex in Africa (GIHOC) at Tema ?. Anyway, thks for Ur comprehensive,insightful and interesting article.(Tres bien) Facts are, Minister of Finance,Governor of BoG,NPA boss & others are all Singing to the Tunes

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• JH-New York City 12 years ago

  determined by the masters voice, to save their job and Stomachs just to Do In (cheat) their own peoples .They throw dust into the people's eyes as usual. And they don't care a (hoot) the least bit. For,lo and behold.As for hi ...
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  determined by the masters voice, to save their job and Stomachs just to Do In (cheat) their own peoples .They throw dust into the people's eyes as usual. And they don't care a (hoot) the least bit. For,lo and behold.As for his household, they drink and eat 4 Times a day.It's his fellow countryman who's not eaten . Ghana has huge Leadership problem. Why's Ghana always has a New Beginning? Heartless petrol increases,Electricity,Water, Food,HealthCare, Housing,Agric,Exorbitant Sch
  Fees, Mosquitoes,(and we mosquitoe Ambassador),lack of help or benefits for the unemployment, the Elderly,the widow. etc etc.

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• Okunka 12 years ago

  CY, I now see why u guys stii believe there is no subsidy - u are using the 2006 PRice Build Up which has been replaced by the 2012 LI approved by Parliament, where there is a price stabilization levy which accounts for the s ...
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  CY, I now see why u guys stii believe there is no subsidy - u are using the 2006 PRice Build Up which has been replaced by the 2012 LI approved by Parliament, where there is a price stabilization levy which accounts for the subsidy as we speak. Pls go to the website of NPA and u can then diagnose what the subsidy is; and, yes there is still a subsidy for Petrol even with the cross subsidy, becos we are paying less to the Suppliers than it cost them to deliver the fuel to us on a CIF Tema basis.
  
  Do the arithmetics!

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• JH-New York City 12 years ago

  So Okunka, why can't the IMF tell the US and others to withdraw subsidy on petrol if any?

  So Okunka, why can't the IMF tell the US and others to withdraw subsidy on petrol if any?

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• Thanks for exposing NPA boss 12 years ago

  Thanks Solo Kwawukume for exposing the NPA boss. And Okunka, there is no subsidy on petrol in Ghana. The NPA only has "cooked" data. Ask the NPA boss whether he even knows the cost of producing a gallon of petrol at TOR. At t ...
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  Thanks Solo Kwawukume for exposing the NPA boss. And Okunka, there is no subsidy on petrol in Ghana. The NPA only has "cooked" data. Ask the NPA boss whether he even knows the cost of producing a gallon of petrol at TOR. At the U.S. Energy Information Administration website will find the following for November 2012:
  
  "Main Components of the Retail Price of Gasoline";
  1. Crude oil constitutes 67% of the retail price
  
  2. Refining = 9% of the retail price
  
  3. Distribution and marketing = 12% of the retail price
  
  4. Taxes = 12 % of retail price.

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