Amid the growing concerns on social media for the National Petroleum Authority (NPA) for the regulatory price floor to be scrapped for fuel prices at the pumps to drop further, the NPA is revealing that any Oil Marketing Company (OMC) able to sell below the price would be engaging in a questionable activity.
Although petroleum consumers are clamoring for a further drop in the current fuel prices, the NPA says it can’t go beyond the set limit. This regulation is in the interest of both consumers and the industry.
According to the NPA, when a fuel price looks too cheap below the industry price floor, it should raise serious questions. The NPA says selling fuel below the industry’s approved price floor is not just unusual, it is deeply questionable.
This clarity was provided by Director of Economic Regulation and Planning at the NPA, Abass Ibrahim Tasunti, in an interview with The High Street Journal.
Why the Price Floor was Introduced
READ ALSO
Speaking to The High Street Journal, Abass Ibrahim Tasunti, Director of Economic Regulation and Planning at the NPA, explained that the price floor policy did not appear overnight. It was introduced in April 2024, after nearly eight years of operating the petroleum price deregulation policy introduced in 2015.
Over time, the NPA observed worrying trends in the market. Fierce competition among oil marketing companies (OMCs) had led to aggressive price undercutting, with some companies selling fuel below cost.
The situation threatened the sustainability and the entire industry and hence the collective decision of all industry stakeholders to act.
“There were issues about companies selling below cost and this was affecting the sustainability of the industry. So this sometimes arises when there’s fierce competition in the industry, and when this happens, it can lead to other challenges that will threaten the supply of petroleum products. As a regulator, we are mandated to protect both the consumer and the petroleum service provider,” Abass Ibrahim recounted.
How the Price Floor is Calculated
Contrary to popular belief, the price floor is not an arbitrary figure or just mere guesswork. It is built using the same petroleum pricing formula that has always guided fuel pricing in Ghana.
The key difference is what the formula includes and excludes.
At the import level, the price floor factors in the global market price of petroleum products using a benchmark published by the NPA. It also includes fixed costs such as port charges, storage fees, and statutory levies that apply to all importers.
What it deliberately leaves out are negotiated costs between importers and their suppliers, as well as the operating margins of Bulk Distribution Companies (BDCs). These are fully deregulated and left to market forces.
At the retail level, the same principle applies. The price floor only reflects fixed costs, taxes, levies, and statutory margins that every Oil Marketing Company must pay to the government after selling fuel.
Crucially, it excludes operating costs and profit margins. These are where competition is expected to happen.
Why Selling Below the Price Floor Raises Red Flags
According to the NPA, the price floor represents the bare minimum cost any legitimate operator would incur, even if they chose to sacrifice all profit.
He explained that the only realistic ways to sell below the price floor would involve tax evasion, unpaid levies, or sourcing products through questionable channels.
Because the price floor reflects costs that apply equally across the industry, it should be impossible for a compliant operator to beat it. He therefore indicated that any OMC able to sell below the price is a signal that something does not add up.
“When you look at the price floor and how it is determined, you realise that it is only someone who’s engaged in something just by either evading taxes or getting products from a source that is unknown or that is not valid, that can set below the price floor, because it takes into consideration the fixed costs that are known by all, that applies to all in the industry. And so this is the rationale for the price floor,” he explained.
Competition is Still Allowed
The NPA was quick to clarify that the price floor does not kill competition. OMCs and BDCs are still free to price their products based on efficiency, scale, and business strategy.
What the policy prevents is destructive pricing that could destabilise supply and harm consumers in the long run.
Since its introduction, the price floor has helped bring discipline to the market, ensuring that competition happens above a realistic cost base rather than through practices that threaten the system.
So for motorists, cheap fuel may be attractive, but when prices fall below the industry’s known cost structure, the NPA says it is not innovation, it is a red flag.
