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The Institute for Energy Security (IES) has opposed calls to abolish the National Petroleum Authority’s (NPA) fuel price floor policy.
The institute stated that the policy remains crucial for safeguarding fair competition in Ghana’s downstream petroleum market, even as pump prices continue to decline.
Recent drops in global oil prices, coupled with the relative stability of the cedi, have led to successive reductions in fuel costs at the pumps.
However, some Oil Marketing Companies (OMCs), including StarOil, argue that the price floor prevents them from offering consumers even deeper cuts.
Responding in a statement sighted by GhanaWeb Business, IES noted that the price floor was never designed to fix prices but rather to prevent predatory pricing practices that could force smaller OMCs out of business.
The think tank also dismissed claims by StarOil that petrol could be sold for as low as GH¢9.50 per litre during off-peak hours, insisting that retail costs remain constant regardless of the time of day.
Fuel could sell for GH¢9.50 without NPA price floor – Star Oil CEO hints.
The Institute called on the NPA to investigate Star Oil’s pricing claims, ensure compliance with existing regulations, and reaffirm the rationale behind the price floor regime to protect consumers and maintain market stability.
“The NPA price floor was introduced as a competition-stabilising mechanism, not as a price-fixing tool. The suggestion that an individual OMC could selectively reduce prices during specific hours (e.g., 10 p.m.–4 a.m.) raises serious regulatory and competition concerns,” part of the release read.
“Fuel retailing is not a digital service where marginal costs disappear at night; storage, financing, distribution, and inventory risks remain constant. If an OMC claims it can sustainably sell below the regulatory floor, this raises legitimate questions: Are such prices below economic cost? Are losses being cross-subsidised to crowd out competitors? Would smaller OMCs survive such a strategy? What happens to prices once competitors exit the market? These are precisely the market failures the price floor is designed to prevent,” it added.
IES stated that the petroleum downstream market is capital-intensive, high-risk, and highly exposed to global price volatility and exchange rate fluctuations.
IES also cautioned that removing the price floor could open the door to unregulated competition, allowing dominant players to undercut rivals, which may ultimately lead to market concentration, supply disruptions, and higher prices in the long run.
The Chief Executive Officer of Star Oil Ghana, Philip Tieku, had earlier disclosed that his company would have been able to sell petrol at GH¢9.50 per litre during off-peak hours between 10 p.m. and 4 a.m. to support night-time demand.
However, he lamented that this plan is impossible under the National Petroleum Authority’s (NPA) price floor policy, which sets a minimum price below, which fuel cannot be sold.
Tieku questioned the logic behind the NPA’s price floor, arguing that it
undermines free-market competition in Ghana’s deregulated petroleum sector.
SA/MA
