Omanghana
The Chamber of Oil Marketing Companies has called on the Government of Ghana to temporarily suspend the GH¢1 Energy Sector Shortfall and Debt Repayment Levy as rising global oil prices and exchange-rate pressures threaten another sharp increase in fuel costs.
COMAC Chief Executive Officer Dr. Riverson Oppong said urgent intervention was necessary to protect consumers and businesses from successive price increases at the pumps.
According to the chamber, current market conditions could push the retail price of diesel beyond GH¢20 per litre if international petroleum prices remain elevated and the cedi continues to weaken.
The organization maintains that temporarily removing the levy would provide immediate relief without interfering with the broader price-setting framework used in Ghana’s deregulated downstream petroleum sector.
COMAC Says Original Justification No Longer Applies
Dr. Oppong argued that the conditions under which the GH¢1 levy was introduced are substantially different from those confronting consumers today.
He explained that the charge was implemented when fuel prices had declined sharply from about GH¢17 to GH¢10 per litre. At that time, the government considered the lower price environment an opportunity to raise revenue for settling energy-sector debts without placing an excessive burden on motorists.
With pump prices now rising again, COMAC believes the original justification for maintaining the levy should be reconsidered.
The chamber said a charge that appeared manageable when prices were falling has become an additional burden as petrol and diesel move back toward historically high levels.
COMAC is not necessarily seeking the permanent abolition of the levy. Its proposal is for a temporary suspension until international prices and domestic exchange-rate conditions become more favorable.
Consumers Confronted With “Double Whammy”
The chamber described the current situation as a “double whammy” for consumers because global oil-market volatility is occurring at the same time as depreciation of the Ghanaian cedi.
Ghana imports a substantial portion of its finished petroleum products, making domestic prices highly sensitive to movements in both international markets and the local currency.
Oil marketing companies purchase products largely in foreign currency but sell them domestically in cedis. When the cedi loses value against the dollar, import costs rise even if international fuel prices remain unchanged.
When both crude oil prices and the exchange rate move unfavorably, the combined effect can force oil marketing companies to make repeated upward adjustments at the pumps.
Higher fuel prices can also spread quickly through the economy by increasing transportation, food-distribution, manufacturing and electricity-generation costs.
Taxes Account for Significant Portion of Pump Prices
COMAC further argued that petroleum consumers are already carrying a heavy tax burden.
According to downstream industry operators, taxes and levies connected to the energy sector account for more than 26% of the final ex-pump price paid by motorists.
The chamber believes suspending the GH¢1 levy would be one of the fastest ways for the government to reduce pump prices because the adjustment could be applied directly through the existing pricing formula.
For commercial drivers and businesses that operate large fleets, even a modest reduction per litre could produce substantial savings over time.
However, removing the levy would also reduce government revenue earmarked for settling energy-sector obligations, creating a difficult choice between immediate consumer relief and longer-term debt management.
NPA Raises Fuel Price Floors
COMAC’s appeal follows increases in the mandatory price floors established by the National Petroleum Authority.
The regulatory baseline for petrol was raised to GH¢13.28 per litre, while the minimum price for diesel increased to GH¢14.35 per litre.
Price floors represent the lowest amount at which oil marketing companies are permitted to sell petroleum products during a pricing window. The mechanism is intended to prevent unsustainable underpricing and protect the downstream sector from unfair competition.
However, higher floors also reduce the ability of companies to offer lower prices, effectively locking in elevated minimum costs across the country.
Actual retail prices may exceed the regulatory baseline depending on taxes, distribution expenses, company margins and other market factors.
Transport Operators Threaten Higher Fares
The increase in fuel prices has intensified tensions within Ghana’s commercial transport sector.
Fuel is one of the largest operating expenses for commercial drivers, alongside vehicle maintenance, spare parts, insurance and station charges. Continued increases therefore place pressure on transport operators to adjust fares.
The Ghana Private Road Transport Union has rejected a proposed 20% fare adjustment and warned that transport fares could instead rise by as much as 30% if the government fails to remove selected charges under the Energy Sector Levies Act.
A substantial fare increase would affect commuters and could contribute to broader inflation because transportation costs influence the prices of food, manufactured goods and other essential services.
Transport unions are expected to continue engaging the government and relevant regulators over the appropriate response to rising operating costs.
Government Defends Levies as Essential
The Ministry of Energy has previously defended the existing levy structure, arguing that the revenue remains necessary to address Ghana’s substantial energy-sector debts.
The government maintains that the funds are needed to settle outstanding obligations, support power generation and protect the stability of the national electricity system.
Ghana’s energy sector has accumulated significant debts linked to power-purchasing agreements, fuel supplies, distribution losses and unpaid obligations across the electricity value chain.
Officials have warned that removing major revenue streams without identifying reliable alternatives could weaken efforts to clear arrears and prevent another financial crisis in the sector.
This position means the government must weigh the immediate effect of fuel prices on households against the long-term need to stabilize the country’s power industry.
Diesel Above GH¢20 Could Raise Inflation
If diesel crosses the GH¢20-per-litre threshold, the effects could be felt throughout the economy.
Diesel is heavily used by commercial vehicles, freight operators, construction firms, mining companies, farmers and industries that depend on generators or heavy machinery.
Higher diesel costs could increase the expense of moving food and other goods between regions, potentially placing upward pressure on consumer prices.
Businesses may also pass additional transportation and production expenses on to customers, complicating efforts to keep inflation under control.
COMAC has therefore urged the government to treat the proposed suspension as a temporary economic cushion rather than a rejection of its energy-sector debt obligations.
The government has not indicated whether it will accept the request. Its response will be closely watched by motorists, transport operators and businesses as uncertainty in the global petroleum market continues.
Source: Omanghana
