Oil Marketing Companies (OMCs) could be left absorbing significant losses when government fuel interventions are announced after they have already bought and transported products at higher prices, the Chamber of Oil Marketing Companies (COMAC) has warned.
The issue is becoming more important as diesel prices come under fresh pressure, with government’s GH¢2-per-litre intervention helping to keep prices from rising even further.
Speaking on Channel One TV’s The Point of View on Monday, September 14, COMAC Chief Executive Officer Dr Riverson Oppong said the timing of such interventions matters because OMCs often commit funds to fuel purchases before any government support is announced.
“If you have bought your product, you have transported it, you have your product at the depot and government comes in to say that we are going to subsidise GH¢2, what happens to the product that you have already bought?” he asked.
For motorists, the timing can directly affect what they pay at the pump. If support comes too late, companies that have already purchased fuel at higher international prices may still need to recover those costs, putting pressure on pump prices.
At the same time, if government requires the companies to sell at a lower price after they have already incurred the higher cost, the difference has to be absorbed somewhere.
Dr Oppong said this is why the question of how any subsidy is funded is just as important as the size of the intervention.
“It depends on where the subsidy is coming from,” he said.
If the cost is placed on the industry and cuts into the margins of OMCs, he said, “I have a problem with that.”
Diesel could have been closer to GH¢20
The intervention has nevertheless provided some relief to consumers at a time when international fuel market disruptions are pushing costs higher.
Dr Oppong said that without the government’s GH¢2-per-litre support for diesel, the price could have reached at least GH¢20 per litre under current market conditions.
Diesel was averaging about GH¢17.60 per litre at the time of the interview, while petrol was around GH¢16.50 per litre.
Some Bulk Distribution Companies (BDCs), he said, were already selling diesel at about GH¢16.50 before taxes and other costs were added along the supply chain.
That means any further rise in international product prices, freight or insurance costs could quickly feed into prices at the pump.
What about petrol?
There has also been discussion about a possible GH¢1-per-litre intervention on petrol.
Dr Oppong said the proposal had come from the Chamber of Petroleum Consumers rather than from an announcement by government.
Government could consider such support, he said, but it would first have to determine where the money would come from.
For consumers, that decision could become important if international prices remain elevated. But for OMCs, the concern remains whether any intervention is properly timed and funded without leaving companies to carry costs they have already incurred.
Dr Oppong said the Chamber is willing to engage the Ministry of Finance on the issue.
The challenge for the market is therefore not simply keeping fuel prices down. It is ensuring that relief reaches consumers without creating another cost that eventually has to be recovered from the businesses supplying the fuel.
