After the Chamber of Oil Marketing Companies (COMAC) raised concerns over what they say is unjustified hike in prices of fuel by the Bulk Distribution Companies (BDCs), the Chamber of Bulk Oil Distributors (CBOD) is now explaining the rationale behind the actions.
COMAC was concerned over the sudden hike by the BDCs, even though many of the products currently in the country were procured before the recent Middle East conflict pushed global oil prices upward.
In addition, the CEO of COMAC, Dr. Riverson Oppong explains that the increments are happening mid-pricing window, which is contrary to the pricing regulations of the National Petroleum Authority (NPA).
But according to the Chief Executive Officer of the Chamber of Bulk Oil Distributors (CBOD), Dr. Patrick Kwaku Ofori, the situation is more complex than it appears.
Speaking in an interview on Citi FM, Dr. Ofori explained that the price increases by some Bulk Distribution Companies (BDCs) are largely driven by how international fuel trading works, particularly the payment arrangements tied to petroleum cargoes.
Fuel in Ghana does not always mean it has been fully paid for
Dr. Patrick Ofori noted that although some petroleum products have already arrived in the country, many of them are still under what industry players call “financial hold.”
In such cases, the products may be physically in storage, but the suppliers, usually large International Oil Trading Companies (IOTCs), still technically control them until full payment is made.
This means the final price may not be completely locked in until the buyer settles the outstanding payment.
“Sometimes you may have the product, and we’ve had an issue of this nature before. Some of the products may be in, but it may be on what we normally call a financial hold. The IOTC still holds custody of the product, and then you negotiate with them,” he noted.
Some contracts follow market prices even after delivery
Another factor influencing prices is the structure of international supply contracts. Dr. Ofori said many fuel trading agreements use what are known as “price triggers.”
These mechanisms determine the final cost of fuel based on global market prices over specific periods.
He explains that, for example, a contract may require a buyer to pay the average international price for a week, or the market price on the specific day payment is made.
This means that even if the cargo arrived before the Middle East crisis escalated, the final cost can still reflect rising global oil prices.
He explained, “There are also products that are in or based on the pricing situation that most of them would go through. Others would maybe say the weekly average or the monthly average. Others would also say, would trigger the price on a daily basis so that they also reduce their exposure depending on who has the product and who has the holding certificate for the product in-country.”
Credit arrangements complicate the market
The petroleum supply chain also operates heavily on credit, meaning some BDCs receive cargoes but pay for them later. Dr. Ofori explains that if payments for previous deliveries remain outstanding, suppliers may place new shipments under financial restrictions until debts are cleared.
In those situations, Dr. Ofori explained, suppliers may adjust pricing to reflect current market conditions.
Not all distributors are affected equally
However, Dr. Ofori acknowledged that not every BDC faces the same situation. Some companies may have already fully paid for their cargoes at earlier, lower prices, while others may still be tied to flexible pricing structures.
As a result, the cost pressures are not uniform across the industry.
The Bottomline
The situation indicates that, despite domestic pricing regulations, the trading framework can still affect how prices are tweaked in the downstream. The global nature of petroleum trading means domestic prices can still respond quickly to international shocks.
With crude oil prices climbing to their highest levels in years amid escalating tensions in the Middle East, analysts say Ghana’s petroleum supply chain is already feeling the pressure.
For consumers, the development highlights how global events can influence fuel prices at home, even when the fuel being sold was delivered weeks earlier.
