Current petroleum pricing formula might be reviewed

Accra, Feb. 3, GNA - Mr. Kwame Owusu, Special Adviser to the Minister of Energy, said on Monday that the current fuel pricing system might undergo a review in three months after its announcement.

The review is necessary to assess the performance of the new pricing system and to find out if the world price of crude oil would have come down to enable the Petroleum Tender Board to incorporate the amount for the payment of the debt at the Tema Oil Refinery.

Speaking to the GNA in an interview, Mr Owusu admitted that the Ministry of Energy has a formula that could incorporate a total of 530 cedis on a litre of fuel to pay the TOR debt in 10 years.

He said if government had added the amount to pay the debt to the current price, it would have pushed the price of petrol to 23,000 cedis. "That would have been too much for th! e people to bear."

He said the Ministry is waiting for some time before going to Parliament for the review and possibly the addition of the debt payment, which is already incorporated in the current formula. The GNA interviewed the Special Adviser on the possibility of reducing the price of LPG to encourage its use, and Mr Owusu said if the price of any of the petroleum products has to be reduced at the time of the review, it would have to come about through cross subsidies.

He explained cross subsidies to mean a reduction in the price of one product for subsequent addition to another product. The interview by the GNA followed concerns expressed by a section of the public that there was the need for the government to reduce the price of LPG, a by-product of crude refining, to serve as an incentive for people to use the product instead of relying on fuelwood and charcoal which has been contributing to the depletion of the country's forests.

Mr Owusu said apart fro m cost recovery, the current petroleum pricing formula enables the Tema Oil Refinery (TOR) to spread the total cost of production on each of the products that comes out of the refined crude oil.

He expressed the hope that despite the situation in Iraq and Venezuela other oil producers would produce more crude oil to reduce the world market price. He said this would enable TOR to record total cost recovery and at the same time pay off the debt.