30% Increase In Petroleum Prices

The Minister for Finance, Mr Yaw Osafo-Maafo last week confirmed a story in The Statesman that petrol prices will go up. In an interview on GTV?s Newshour, he explained that the Tema Oil Refinery (TOR) was losing about ?50 billion monthly, which had to stop.

He did not give the magnitude of the increase but credible reports reaching The Daily Dispatch reveal that the increase will range between 30% and 35%. A gallon of petrol will thus cost between ?13.650 and ?14,175.

A 19-page letter of intent, memorandum of economic and financial policies submitted to the International Monetary Fund (IMF), dated January, 2002, stated that one of the benchmarks of ?the petroleum price adjustment formula will be modified from end-March, 2002 to incorporate a Petroleum Debt Service Surcharge (PDSS)?.

On petroleum prices, the Memo stated that the ?the automatic adjustment formula for petroleum, which was implemented in June, 2001 and will operated continuously during the programme period, is identified to pass through ex-refinery prices-the net cedi cost of refined petroleum product imports to ensure full cost recovery at the Tema Oil Refinery (including financial charges, excerpt charges on debt subject to assumption by the government in 2001).

From March 2002, the formula will include a petroleum debt service charge equal to 95% of any decline in oil import costs from the average level prevailing during the November 27-December 26, 2001.

In an interview published by The Daily Dispatch last April, the Minister for Energy, Mr Albert Kan-Dapaah said the adjustment of prices of petroleum products to incorporate debt service surcharge (PDSS) was already in operation. The effect of the PDSS will only manifest when there is a windfall in saving arising from a reduction of prices of crude oil. The Energy Minister had also said in an interview that unless these were a massive shift in supply and demand dynamics of the oil trade, the possibility of an increase in petroleum prices was farfetched.