Government has decided to extend the GH¢2 per litre reduction in the regulatory margin on diesel for the next pricing window to cushion consumers against rising petroleum prices.
The decision Citi Business News understands follows growing concerns over an expected increase in fuel prices at the pumps from the first pricing window of September.
The intervention, which was originally introduced as a temporary measure for two pricing windows, was expected to expire at the end of August.
However, government has opted to maintain the reduction at least for the next pricing window, effectively preventing the full GH¢2 per litre regulatory margin from being restored to diesel prices.
The development will come as relief to motorists, transport operators and businesses, particularly as diesel prices are already selling at around GH¢17 per litre at most Oil Marketing Companies (OMCs).
The Chamber of Petroleum Consumers (COPEC) had been pressing government to extend the intervention, warning that allowing it to expire could push diesel prices close to GH¢20 per litre.
Executive Secretary of COPEC, Duncan Amoah, argued that maintaining the intervention would help cushion consumers from the expected upward adjustment in petroleum prices.
“Government originally had indicated it was going to do that for just two window periods, which is a month. We would want to plead that at least the next two weeks be considered again. Already diesel is around GH¢17 a litre for most of the OMCs.
“Allowing the GH¢2 to come back [off] would mean we will be doing GH¢19, approaching GH¢20 a litre. That situation I think the government itself is uncomfortable for,” he said in an interview with Citi Business News.
COPEC had also projected marginal increases in petroleum prices from Tuesday, September 1, citing developments on the international oil market.
Duncan Amoah said petrol prices were particularly likely to increase, following a nearly 10% rise in the commodity’s international trading price over the preceding two weeks.
“Fuel prices are likely to inch up from the first window September. Petrol most likely, since it’s done almost 10% to close trading over the past two-week window, and decisions [are] that our prices would go up,” he added.
Government introduced the GH¢2 per litre reduction in the regulatory margin on diesel effective August 4, following a surge in international oil prices that pushed up petroleum prices on the domestic market.
The intervention was the government’s second major attempt to cushion consumers from rising fuel prices since tensions in the Middle East began escalating in February.
The extension into September is therefore expected to limit the immediate impact of higher international oil prices on diesel consumers and prevent a sharper increase in transport, logistics and operating costs for businesses.
It will also be government’s third attempt in mitigating rising fuel prices.
It could also provide some relief to households, as higher diesel prices typically feed into transportation and the cost of goods and services across the economy.