I have observed with keen interest the ongoing conversation about the petroleum floor price. I am also surprised by some civil society organizations (CSOs) advocating for its removal.
I have always believed that CSOs should understand the problems that existed before the introduction of a policy and whether the policy, when implemented, has resolved those issues.
What Problems Led to the Floor Price Policy?
1. *Preventing Losses in Downstream*: Some Oil Marketing Companies (OMCs), in an effort to increase product volumes, were pricing products in a way that resulted in losses. Without proper accounting strategies and setups, these companies eventually collapsed, leaving significant debts within the value chain.
2. *Illegal Products and Dumping*: Companies smuggling illegal products into Ghana offer unrealistic discounts to OMCs, resulting in artificially low prices that distort the market.
In light of these developments, the National Petroleum Authority (NPA) introduced the petroleum floor price to protect the downstream industry. It is ironic that those companies which can no longer dump illegal fuel at low cost are the ones lobbying for the removal of the floor price.
No one can be more Catholic than the Pope. The NPA wants lower prices for Ghanaians more than any other institution; however, this needs to be achieved in a sustainable and responsible manner. The introduction of the deregulated market is intended to promote healthy competition.
The floor price set by the NPA reflects the cost of products without profit margins. So why would anyone want to sell below the cost price of a product? Any company can decide to sell at the floor price, which means selling at cost with no margin to cover overhead costs. While that's a prerogative, it does not make business sense.
Let us all ignore the criminal gangs lobbying to distribute illegal products in Ghana.
Thank you.
Kwadwo Poku
INSTEPR
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