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The National Petroleum Authority (NPA), has addressed concerns by the Africa Centre for Energy Policy (ACEP) about its decision to implement the price floor for petroleum products from April 16, 2024.

NPA earlier, announced its decision as part of the New Pricing Guidelines for Oil Marketing Companies and other players in the industry.

Among other things, ACEP argued that the action taken by NPP is illegal because it falls beyond its purview.

In a press release, NPA explained that the price floor will not affect competition between OMCs and others in the energy sector nor will it impose high prices on consumers as ACEP and other stakeholders fear.

“NPA is mandated by its Act to protect the interest of consumers and Petroleum Service Providers (PSPs) alike and uses its policies and regulations to achieve this mandate. A multi-stakeholder committee was established in 2021 with representation from all key stakeholders in the industry to assess the price deregulation policy which has been in operation since July 2015.”

“One of the major concerns that emerged from the committee's work was the inability of PSPs to sometimes fully recover their costs due to unhealthy price competition that sometimes occurs amongst them. The proposed solution to the above concerns is to set "price floors for BIDECs and OMCS/LPGMCS which take into consideration only the fixed costs, taxes, levies, statutory and distribution margins in the Prescribed Petroleum Pricing Formula. These are costs that apply to all PSPs,” parts of the statement read.

NPA assured that because it is mindful of the price deregulation policy and how it promotes competition amongst players in the petroleum downstream Industry, the price floors will exclude the margins of the PSPs. 

The Authority noted that PSPs are at will to determine their margins just as they currently do and as is expected of them under the price deregulation policy. 

“As already mentioned, variations in prices results from the freedom PSPs have been given to independently set their margins under the price deregulation policy. The amended pricing guidelines do not prevent the PSPs from doing this, hence, the competition that exists amongst PSPs will continue.”

The NPA noted that it will publish the price floors prior to the start of each pricing window for the information of the public for ease of reference. 

“The Authority already has put in place measures such as the Petroleum Product Marking Scheme (PPMS), Electronic Cargo Tracking System (ECTS), Fuel Monitoring System, among others to address other industry issues raised by ACEP such as the influx of illicit products through approved and unapproved routes, tax evasion, among others.”

This explanation comes on the back of a recent announcement of a possible increment in petroleum prices. The price floor for petroleum products is part of the Amended Pricing Guidelines rolled out by the NPA on April 1, 2024.

According to the Amendment to the Pricing Guidelines, the NPA “shall set and communicate price floors for the deregulated products for each pricing window.”

In a letter to industry players signed by the Deputy Chief Executive of the NPA, Curtis Perry Okudzeto, the Authority advised all the Petroleum Service Providers to strictly comply with the guidelines.

The National Petroleum Authority promised that it shall periodically furnish Petroleum Service Providers with the full pricing formula, stating the specific taxes, levies, and margins applicable for each pricing window in excel format.

In contrast, the Chief Executive of the Chamber of Bulk Oil Distributors, Dr Patrick Kweku Ofori, said there are still some concerns that need to be addressed before the floor price for petroleum products finally takes off from April 16, 2024.

Dr. Ofori opined that there is the need to take a second look at the fore rates which will be used by the NPA in setting the price floor.

“We wish they could use Bloomberg Foreign Exchange rates, rather than Bank of Ghana rates”, he said.