FOB increases cause of petroleum price hikes – Gov’t

Government officials have explained the underlying cause of this week’s 9% increase in the cost of petroleum products at the Filling Stations, saying it was mainly due to the increase of Free-On-Board (FOB) prices of petroleum products between February and May.

This means that the cost of movement of finished petroleum products brought into Ghana are borne by the sellers of the petroleum products who have in turn increased their shipping cost by 37% for Petrol, 26 % for Diesel and 43% for LPG between February 2015 and May 2015.

Apparently, the reduction of world market prices of Crude oil has its downside, as crude oil sellers are topping up their cost of shipment to offset losses made due to the rapidly declining world market prices.

This explanation by government officials has been necessitated by serious criticisms questioning government’s rationale for hiking the prices of petroleum price when world market prices of petroleum product are at their all-time lows.

Also, another reason why petrol prices in Ghana have been hikes is government’s policy of removing subsidy build-up which has grossed GHC 146 Million.

The Mahama administration has also realized that whereas these subsidies were introduced to cushion the vulnerable and low-income earners in the country, its benefits have been minimal because of the activities of unscrupulous persons who divert, smuggle or adulterate some of the subsidized products.

Meanwhile, the 9% increase in fuel price will not result in increases in transportation fares because of an agreement reached between government and the Transport Unions that clearly states that unless upward fuel price adjustments exceed a 10% threshold, transport fares will be increased only twice in a year.

A statement issued jointly on Sunday May 17, 2015 by the two road transport operators in Ghana (GPRTU and the GRTCC) warned all transport operators against hiking transport fares.

“All transport operators are being informed not to increase transport fares pending the midyear review of transport fares which is scheduled for June 2015,” read the statement signed jointly by Stephen K. Okudzeto and Alhaji Aliyu Baba, the two General Secretaries of the transport unions.

To further ease the effects of the increased fuel prices, the government has procured 116 buses for inter and intra-city transport. These buses will soon be deployed and form part of a package to bring in almost 500 buses for metro mass transit, STC and Bus Rapid Transit (BRT) operations.

“These buses which will charge very affordable fares will offer the general public a cheaper and more efficient alternative mode of road transport,” a government statement read.

Despite the explanations by government, the opposition leader of the New Patriotic Party (NPP), Nana Akufo Addo, is whipping up sentiments in Europe on his 16-day political tour of Europe, describing the Mahama administration as insensitive.

“When President Kufour left office, people were speaking of our country as Africa’s success story, possessing a stable democracy and an economy on the rise. Within six year, of his leaving office, Ghana has retrogressed. Ghanaians are suffering and experiencing difficulties never witnessed in our history,” Akufo Addo told his followers in Germany on Saturday, as he used the fuel price hike to canvass for support for his presidential bid in 2016.