Audio Attachment Listen to Prof Addae Mensah and Dr. Kwabena Donkor speak to Kojo Oppong-Nkrumah on the crude oil debate [13:25 minutes]

Professor Ivan Addae Mensah, Chairman of the National Petroleum Authority, says until government comes out to change the petroleum deregulation policy, the authority will have no choice but to run it.

Speaking on Joy FM’s Super Morning Show, he said the rising crude oil prices on the world market has been a regular subject at the NPA’s board meetings and believes it is time for the government to re-look the policy.

Prof. Addae Mensah said however that calls of government to reduce taxes it has imposed on petroleum products may not make much difference, and called for a debate for what options would best serve the Ghanaian economy.

“Previously the taxes were percentages of ex-refinery price, but now we have the taxes fixed so really at this stage with the way the world price of crude oil has gone up, and for that matter finished products have gone up on the world market, the taxes have become relatively insignificant,” he advanced.

He said even if the taxes were removed, there were still some of the products that were being subsidised by government and asked what would become of those subsidies.

“Are you also going to remove the subsidies on some of the products like the LPG? So these are some of the questions we need to answer as a nation. Do we want government to put money into subsidising petroleum products again and go into economic recession as happened previously or should we rather take measures to cut down on our personal fuel consumption?”

He said it is about time motorists looked at their own lifestyles and the way they use fuel.

According to Prof. Addae Mensah, Ghanaians previously consumed more premium than diesel, and the difference was used to subsidize diesel, “but now with the SUVs and the huge vehicles that have come onto the roads as well as the big articulators, we are now consuming almost twice as much diesel as we are consuming premium. So even what we get out of premium for subsidising diesel has become insignificant. We are consuming a lot of diesel and that is bringing in inequities or disequilibrium into the pricing system.”

Predicting that the options for government are indeed very limited, he said it is still worthwhile for government to sit with the experts to see what could be done, adding that it appears crude oil price forecasts for the year, which predicted price recessions around this period, appear to have been thrown out of gear with the continued price hikes.

He said among the suggested options is hedging, but given Ghana’s situation presently, he would not advice that hedging is considered a necessary risk because it can throw the country out of gear.

“I would still want to believe that there is a limit beyond which the world prices cannot go because the developed countries themselves would begin to suffer and things are likely to start cutting down. Let’s give ourselves a month or two, after that maybe government can start looking at other options.”

We can do something about it

	Prof Ivan Addae Mensah

However, Dr. Kwabena Donkor, an energy consultant who also spoke on the programme, said it is now an issue for government to exercise leadership in deciding what really should be the national priority.

“I am of the opinion and I strongly believe that diesel should not just be allowed to go because the world market says so or because we’ve opted for a free market economy. Diesel has too many implications for our macro economic stability for our economic growth and therefore a policy direction is needed. This is the time to call for leadership, this is the time that Government has to exercise leadership.”

He said diesel plays strategic roles in the economy and it would be unfair to pass on every market rise on Diesel to industry, transport and indeed the public.

“And it is not that we cannot do anything about it, we can do something about the taxes side. We may not be able to do anything about the levies …We can do something about the taxes.”

He disagreed with Prof Addae Mensah on the score that reviewing the taxes may not yield much in terms of prices, suggesting that given a national direction, even the little could be used positively.

“I disagree, the taxes are not insignificant. If he is talking about the cross-subsidisation and the social impact levies, well, there may be some points but even that they are not insignificant, they can be used positively if we have national direction. If we have policy that this diesel is our key economy mover and therefore as much as possible, the impact of diesel should be as minimal as possible within the constraints of this world system.”

Prof Addae-Mensah agreed that ‘this is the time for Government to really sit down and offer leadership and look at the policy options available and see whether we can look in another direction,” while Dr. Donkor said even if the number of SUVs on the roads have increased, they are nowhere near the articulator trucks, the cargo trucks and agricultural machinery such as tractors.

“More importantly, a number of industries are now also operating on generators and these generators are fired by diesel, and therefore in the national context, and that is where the issue of leadership comes in. Government will have to take a temporal policy position that look, we are going to reduce the taxes on diesel and if we have to even slap more taxes on petrol, I will go for it,” he said.


Author: Isaac Yeboah