OMCs dismiss Calls for reduction in Fuel Prices

.Chairman of the Association of Oil Marketers Association, Kwaku Agyeman Duah says fuel prices cannot be reduced despite the call for reduction because Oil marketers have not recovered from the purchasing prices of fuel.

His comment comes after the recent stability of the cedi due to the low demand for foreign currency in China because of the epidemic COVID-19.

According to the Chairman, OMCs have invested highly into the prices of fuel and until that is recouped there cannot be a proportionate reduction in fuel prices.“Hitherto, there was no comment about it, we were sweating under diesel, diesel price was so high that the price of diesel we bought some time ago wasn’t the actual price. We had to somehow subsidize it and we have not recovered. So the rate at which the diesel price was going up that’s not what we actually increased. 

That is why when we are coming down, you do not expect to have a proportionate reduction for the price because that is where we also recover. The question you may ask is how long will this recovery last and that depends on the market forces” he explained.

He argued that OMCs are in the recovery mode and consumers will enjoy reduction in fuel prices when the recent stability of the cedi continues for a longer period. In Ghana, fuel prices are affected by the stability of the cedi, the global oil prices and the tax components and margins of OMCs that constitute the price build-up of a litre of fuel.

The rate of reduction in fuel price is highly determined by how these three factors independently impact price margins.

How does the hike in fuel prices affect the Economy?

According to a  Research Department of International Monetary Fund (December 2000), the rise (instability) in oil prices will give rise in the cost of the economy, resulting in an increase in the relative price of energy inputs and putting pressure on profit margins. There will also be an impact on the price level and on inflation. Oil price increase will affect equity and bond valuations, and currency exchange rates.