A Senior Lecturer and Economist at the University of Ghana, Dr. Ebo Turkson, has questioned the rationale behind the recent fuel price hike, noting it is an indication of economic mismanagement.
Prices of various petroleum products have seen a 27 percent jump since the beginning of the year amidst stability in the cedi and the continuous decline in world prices of crude oil.
Even though a barrel of crude oil on the world market as of yesterday was $38, as against $100 in June last year, consumers in Ghana now pay about GH¢15 per a gallon of fuel, while in the United States of America (USA), a gallon of petrol is sold at just about $2 (about GH¢8).
In an interview, Dr. Turkson said the situation cannot be explained and understood by experts, thereby indicating a mismanagement of the economy.
“I am not too sure why this decision was made considering the fact that world oil prices have fallen and most countries that import oil have rather reduced their fuel prices. That is what we were expecting in this economy so that if utilities have increased then fuel cost must reduce so that consumers will not feel too much the impact of the increment in the utility prices. But we have rather seen fuel prices being increased.
“It doesn’t define the direction of this economy and some of us tend to believe that the economy is being mismanaged. I am not sure whether any analysis was carried out before implementing policies as these which have negative impacts on the economy,” he said.
Dr. Turkson further stated that the timing of the increment will worsen the livelihood of residents in the country since it comes at a time where Ghanaians have not fully recovered from the utility tariff hike barely a month ago.
“The fuel price hike will increase the cost of living in the country since transportation forms part of the major expenditure of workers, and coupling the fact that there has not been increase in the real incomes of consumers, the income levels of workers will further decline especially at a time that utility tariffs were increased not long ago,” he said.
Government in the 2016 budget has targeted end of year inflation rate of 10.1 percent, however, Dr. Turkson believes the target cannot be met since the recent fuel price hike will cause inflation to increase.
“The cost of transformation forms part of the factors in the consumer basket which affects the prices of goods and services. So if fuel price increases, it will automatically increase the prices of goods and services, thereby, increasing inflation.
“What it means for producers is that the cost of production will also increase. And those firms who export will no longer be competitive compared to other firms who are outside Ghana. Domestic firms that produce locally will also see increase in their cost of production and that will lead to increase in the prices of their products.
“What it means is that imported goods are going to be cheaper than locally produced goods. So if we want to encourage the consumption of domestic goods then we must decrease the cost of production in the economy,” he said.
Another twisting development to this story is a report by the Parliamentary Select Committee on Finance which has revealed that Parliament approved a 5.18 percent increase for the price of petrol, 2.90 percent for Gas Oil and 1.74 percent for LPG.
What this means is that the fuel prices were supposed to go up not more than five percent. However, the situation turned out to about 27 percent at the pumps.
This, the Chief Executive of the Chamber of the BDCs, Senyo Horsi, in an interview with Citi FM, an Accra based radio station, insisted the introduction of new taxes by government are solely responsible for the situation at hand.
“As a matter of fact, BDCs have reduced their prices in the last few weeks in tandem with the world market trends. We respond to the world market and that’s how we price oil marketing companies. The situation you have at the pump is just a reflection of the impact that the new taxes have had on the ex-pump price. The taxes are quite many and a number of them too get taxed on another tax, so it has some extra impact,” he said.