Baskin Africa calls on government to stabilize fuel prices using the windfall on crude

The government of Ghana must stabilize fuel prices using the windfall on the sale of crude. This call is contained in a press release by policy think-tank, Baskin Africa.



Currently, Brent crude is selling between $98.53 and $100.56 and with the government’s benchmarked prices at $61 in the 2022 budget creating a windfall for the government, the government can create a flexible subsidy to cushion the Ghanaian taxpayer according to the Policy Think Tank. “Mind you, the government benchmarked prices at $61 in the 2022 budget, so any price above this will constitute the windfall.”

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In the 2022 budget, the government’s benchmark price for crude was pegged at $61. So, with Brent crude currently “selling between $98.53 and $100.56”, there’s a windfall of between $37.53 and $39.56 for the government.

In a statement signed by its Executive Secretary, Issifu Seidu Kudus Gbeadese, Baskin Africa indicates that in 2015, “as a results of the shortfall in prices of crude as low as about $28”, the government of the day introduced the Special Petroleum Levy to make up for the deficit.

“So, if the citizens are taxed to fill in a gap when it’s created as a result of a shortfall between the benchmark prices and the actuals, then it is only fair for us to expect a subsidy when there is a windfall”, the statement said.

“It is becoming evident that the government is unapologetically insensitive and untruthful to the suffering masses. To cite the partial deregulation policy as the basis for the current situation of having to offload all the cost on the consumer is unfair and insensitive. The deregulation policy is partial since government still controls prices through taxes, levies and margins”. The statement added.




Baskin Africa has therefore suggested three possible ways of stabilizing the prices of petroleum products to cushion the masses:

  1. That the government must use the windfall from the sale of crude oil as the prices peak above the benchmark price as a flexible subsidy.
  2. That government must immediately scrap the Special Petroleum Levy, Price Stabilization Levy and BOST margins in order to create some breath for the poor masses.
  3. That government should revive the Tema Oil Refinery (TOR) to start refining some of our crude, this will largely net out the pressure from the depreciation of the cedi, which is currently one of the biggest factors influencing the price hikes.

The first two suggestions, according to the policy think-tank should be “an immediate and short-term solution while government explores the third option as a long term solution”.

 

Read the full statement below:

 

Press Release

For Immediate Release

16th March, 2022

THE GOVERNMENT MUST STABILIZE PRICES OF PETROLEUM PRODUCTS USING THE WINDFALL ON THE SALE OF CRUDE

Baskin Africa, just like most Ghanaians, is profoundly worried about the sporadic increases in the prices of petroleum products within the last couple of weeks. The average Ghanaian is becoming increasingly hopeless as a result and the hardships keep compounding each passing day.

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We admit that the Russia-Ukraine war has a toll on prices of crude in the world market. Brent crude is selling between $98.53 and $100.56, creating a windfall for the government. Mind you, the government benchmarked prices at $61 in the 2022 budget, so any price above this will constitute the windfall.



In 2015, when government had a deficit in the middle of the year as a results of a huge decline in prices of crude as low as about $28, the Special Petroleum Levy was introduced to make up for the deficit. So, if the citizens are taxed to fill in a gap when it’s created as a result of a shortfall between the benchmark prices and the actuals, then it is only fair for us to expect a subsidy when there is a windfall such as this.

It is becoming evident that the government is unapologetically insensitive and untruthful to the suffering masses. To cite the partial deregulation policy as the basis for the current situation of having to offload all the cost on the consumer is unfair and insensitive. The deregulation policy is partial since government still control prices through taxes, levies and margins.

It is worthy of note that price build up is made of exogenous factors (ie prices of crude, exchange rate and freight) and endogenous factors (ie taxes, levies and margins). To a very large extent, the government doesn’t have control over the exogenous factors except for exchange rate, but it has total control over the endogenous factors. So, a sensitive government will brilliantly manipulate the taxes, levies and margins in times like this in order to cushion the already suffering masses.

The narratives from government are mostly tainted with untruths and insincerity. The only interest of government in these hard times is how to maximize revenues at the expense of the poor people. By so doing, it reneges on its core mandate of fulfilling its part of the social contract by ensuring economic and social security for especially the poor majority.

In view of this, Baskin Africa suggests three possible ways of stabilizing the prices of petroleum products to cushion the masses:

    1. The government must use the windfall from the sale of crude oil as the prices peak above the benchmark price as a flexible subsidy.
    2. Government must immediately scrap the Special Petroleum Levy, Price Stabilization Levy and BOST margins in order to create some breath for the poor masses.
    3. Government should revive the Tema Oil Refinery (TOR) to start refining some of our crude, this will largely net out the pressure from the depreciation of the cedi, which is currently one of the biggest factors influencing the price hikes.



The first two suggestions should be an immediate and short term solution while government explores the third option as a long term solution.

 

-Signed-

Issifu Seidu Kudus Gbeadese

(Executive Secretary-Baskin Africa)

Contact: 0244198031



 

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