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Opinions of Tuesday, 19 February 2013

Columnist: Adu, Kwasi

Petroleum subsidy claim is fraud

By Kwasi Adu

On 28 December 2011, the National Petroleum Authority (NPA) informed Ghanaians that the price of petroleum products was being increased by between 15% and 30%. The reason given by the NPA was that it was necessary to remove what they called government subsidies on the prevailing international crude oil and petroleum prices, which at the time was US$111 per barrel.

It must be remembered that for a very long time, Ghana has been importing finished petroleum products such as premium petrol, gasoil, kerosene, etc. There is therefore no evidence that the finished product that the Petroleum importers have been bringing to Ghana is from Brent Crude oil. It must also be remembered that there are various grades of oil, such as WTI crude (West Texas Intermediate oil - which is a type of light crude oil), Brent crude etc. There is also an OPEC basket price which is usually US$4.00 less than the Brent Crude per barrel. The WTI price is usually US$2.00 less than Brent crude oil. Brent crude is a combination of crude oil from 15 different oil fields in the North Sea (mostly Western Europe). It is less “light” and “sweet” than WTI, but still excellent for making petrol. There are more than 200 other grades. They include Medanito (Argentinian crude); Girassol (Angolan crude); Dalia (Angola): Ceiba (Equatorial Guinea); Bonny Light (Nigeria); Antan Blend (Nigeria), etc. These are all cheaper than Brent Crude. They cannot say that our petroleum products come from the North Sea. It is therefore disingenuous and fraudulent that the Ghana Government and the NPA always quote the Brent crude prices as the prices at which Ghana buys oil. They should tell us where they buy their oil.

Using the price of Brent Crude to determine the prices for petrol that we buy in Ghana is like selling me a TICO car, and then turn round to ask me to pay for it at the price of a Rolls Royce.

The last time that the NPA increased the price of petrol, the Ghana Cedi was GH¢1. 55 to US$1.00. Currently the Cedi is GH¢1.90. This represents a 22.6 % depreciation in the value of the Ghana Cedi. It is the government that manages the Cedi. It is the government that is responsible for the security agencies. There are cases whereby individuals carry abroad, suitcases full of US Dollars changed at Forex Bureaux in Ghana through our ports. When such persons are identified, the Customs Officer who reports such a case is transferred to some remote border location as punishment for drawing attention to such frauds. The government looks on while the banks in Ghana engage in speculative money deals, thereby causing a drop in the value of the Cedi. If therefore through the inefficiency of government the Cedi depreciates, why should the ordinary Ghanaians be made to pay for the depreciation of the Cedi without question?

Another question that the Ghana Government should answer is when did the subsidy, which in December 2011, they said they had removed come back? Why did they not tell the people the circumstances under which they were subsidizing? Why do they come, 13 months later to tell us as if the subsidy was not removed and that they were all the time there?

The NPA claim on December 2011 that the average price of crude was US$111.00 per barrel was false and a complete fabrication since they were only referring to the price of Bent crude oil. Similarly, their claim that by the end of 2013, the government of Ghana would spend over GH¢ 1 billion in subsidies is also false.

Having lied to the whole nation, all the members of the NPA should be sacked; and the NPA abolished since they have become useless and untrustworthy. Instead of representing the interests of the government and people of Ghana, they are representing the interests of the oil importing companies.

As at the end of day, on 12 February 2013, the price of WTI crude was US$97.57 per barrel. A check on the web (http://oil-price.net/dashboard.php?lang=en) will confirm this.

The fact is that, the Ghana government of 2001-2008 deliberately adopted a policy to run down the Tema Oil Refinery (TOR) in order that the country would import finished oil products through their political companies. That policy has continued till today, to the extent that in the last six months, TOR has not processed a teaspoon of crude oil. In spite of their claim to support the private sector, the Government has not shown any interest to support the building of any private sector oil refinery in Ghana. They should tell us why!

With modern technology, it is estimated that out of one barrel of crude oil, we can get 42 gallons of petrol; In addition we can get several additional gallons of Diesel, kerosene, and lighter fuels such as methane, propane, butane, etc.

It will be cheaper to refine crude oil than import the finished product. In addition, we get other bi-products such plastics and bitumen (popularly known as “coal tar”) for the construction and tarring of roads. Currently, “coal tar” is imported from Norway, South Africa, and other overseas places at the expense of our foreign exchange situation. Is it a wonder that the Cedi keeps depreciating? However, our leaders would always want to burden us for their inefficiency and mismanagement of our finances.

How can anybody, in his or her right frame of mind, sell TICO for the price of a Rolls Royce, add taxes on top of it, and then tell us that he or she is subsidizing us?

It is therefore a deception for government officials to say that they are subsidizing the price of fuel.

We throw a challenge to all those government officials, who ride in government provided petrol or diesel guzzling four-wheel drives at no expense to themselves to have a logbook in those cars and write down the mileage of every official event that they attend in an exercise to account for their consumption of fuel. There should then be an independent reporting authority that will check these and periodically publish them in the newspapers. This should be their contribution to the principle of accountability and transparency.

The NPA Act 2005 (Act 691) enjoins the NPA to, among other things to:
a. investigate on a regular basis the operation of petroleum service providers to ensure conformity with best practice and protocols in the petroleum downstream industry;
b. protect the interests of consumers and petroleum service providers
c. conduct studies relating to the economy, efficiency and effectiveness of the downstream industry
d. collect and compile data on international and domestic petroleum production, supply and demand, inventory of petroleum products, and pricing of petroleum products.
e. monitor standards of performance and quality of the provision of petroleum services
f. initiate and conduct investigations into standards of quality of petroleum products offered to the consumer

Is the NPA doing any of these things? No.!!! If they were; then how come they have not been able to suggest what should be done to ensure that kerosene, which they say is for the benefit of the rural areas (where there is no electricity), actually reaches its target rather than ending up in the cities? What are they sitting there doing?

How come they do not bring to the attention of the government for action the delinquent petroleum marketing operators who have been discharging in Accra petroleum meant for the North and its environs? In their laziness, they turn round to tell us that targeting of the products to the communities is not working.

How come they are not exposing for prosecution the companies which mix kerosene with gas oil for the public?

Have they thought about the need to establish more kerosene delivery points in the rural areas instead the age-old practice of delivering them to petrol-filling stations which are few and far between in the rural areas?

Since the NPA is supposed to monitor the OMCs and receive monthly reports on the locations of their deliveries, what have they done about petroleum going to the wrong locations?
They want us to pay the market price of petroleum, but they do not want to bother about whether the products reach the targeted consumer.

The NPA Act stipulates that any excess that is accrued on one of the additional taxes that we pay on petrol, called the Unified Petroleum Price Fund (UPPF) shall be utilised in the execution of a designated project related to the petroleum downstream industry. Why have we not seen published anywhere, the accounts or records of the Unified Petroleum Price Fund (UPPF) to show which rural targeted project has been embarked upon?


I heard the NPA Chief Executive say the government should be using the revenue used for subsidy on the school feeding programme? Yet the same person turns round and says that the NPA does not involve itself in political policy? What hypocrisy?

They should come out and answer the above questions and stop frightening the population that somehow, if they do not increase the price of petrol, the country will collapse. This is the politics of fear and it is disgraceful that the Bank of Ghana, the Ministry of Finance and the NPA should be sinking so low.