Ghana: Crude Oil Price Does Not Determine Petroleum Product Prices – Dep Minister
Deputy Energy Minister, K.T. Hammond, has disclosed that prices of petroleum products in the country are not determined by crude oil prices as is being perceived by sections of the public.
He told Parliament that following government’s decision to deregulate the petroleum downstream market in 1994, pricing of petroleum products has been based on import parity.
“Product pricing is therefore not derived from crude oil prices, but from the international product prices as published by Platt”.
The Minister said this when he was answering questions posed by the ranking Member of the Energy Committee and MP for South Dayi, Dr. Kwame Ampofo.
The MP asked how the current ex-pump prices of petroleum products are arrived at, particularly for petrol, diesel, kerosene and LPG from crude oil prices.
Mr. Hammond stated that the current petroleum products prices were arrived at using import parity pricing mechanism for all products based on average prices on the international market for different products.
He said the five-day window around the bill of laden date is what is used to price the products.
The Minister explained that if a ship, for example, was loaded on July 6, it is the average of the Platt prices quoted for the period of July 4 to July 8 that would be used to price the product free on board (FOB).
This FOB price, he added, is then added to the freight and insurance cost, which are all gotten from competitive tender supervised by the National Petroleum Authority.
He said the ex-refinery cost in $/metric ton is then converted to $/litre by multiplying by the conversion factor for each product. This is then converted into cedis per litre by multiplying by the bank of Ghana weighted exchange rate average for the period. The different taxes and levies backed by Acts of Parliament are then applied to the ex-refinery price in cedis per litre to give the ex-depot price.
Transporters’, dealers’ and marketers’ margins, which are negotiated by the NPA and the various stakeholders, are then added to the ex-depot price to arrive at the ex-pump price.
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