Ministry of Energy Outdoors Petroleum Pricing Formula

The Ministry of Energy on Tuesday outdoored a petroleum pricing formula to enable the public calculate with ease any increase or reduction in ex-pump refinery prices, using all key indicators and determinants.

The formula provides for automatic adjustment in the ex-refinery price of petroleum products based on changes in the Free on Board prices of the products, government taxes and levies as well as changes in the exchange rate and distribution margins. The formula, which has been in existence since 1997, is being unveiled for the first time in fulfillment of the Energy Minister, Albert Kan-Dapaah's promise in February, to make the formula public for all Ghanaians to understand how petroleum pricing is done.

Mr. Kan-Dapaah said the launch of the formula underscored the commitment of the government to the principle of transparency in all facets of governance.

"It is my hope that the average Ghanaian will be able, from today, to determine when to expect a decrease or increase in petroleum prices," he said.

He debunked rumours that the launch of the formula would lead to imminent increases in the price of petroleum products, explaining that although the formula factors in the restoration of petroleum tax, the tax would continue to be pegged at zero for now.

"Today the traded prices of crude oil are falling and the exchange rate has stabilized. In these circumstances, there is no threat of fuel price increases and the speculation must cease," he urged.The Minister, however, maintained that there was the need to do realistic pricing of energy products, saying non-recovery of cost of services would disrupt the reliability of supply of energy products. Mr. Dan Amoah, Acting Director of Petroleum said the pricing policy is based on the objectives of full cost recovery of all investments made to procure, refine, transport and market energy services, enable government to raise revenue and ensure that prices of the ex-pump prices are the same throughout the country.

He mentioned absolute changes of five dollar per metric ton of the cost, insurance and freight, 50 cedis in the exchange rate per one dollar and the combined effects of the two factors such that absolute change in the ex-refinery price equals a minimum of 10 cedis per litre minimum as factors that could trigger adjustment in ex-refinery prices.