NPA price floor undermines competition — Duncan Amoah

The Executive Director for the Chamber of Petroleum Consumers (COPEC), Duncan Amoah, says the National Petroleum Authority’s (NPA) announcement of new price floor for petroleum products for the second pricing window from October 16 to 31 will stifle competition and amounts to interference.

However, he was quick to add that the NPA was compelled to act to forestall the market pressure because of price wars that prevents importers from recovering their money, due to undercutting of prices from other competitors.

Nonetheless, according to him, this development which meant no oil marketing company should be selling below the price quoted by the NPA makes nonsense of the idea of deregulation which makes prices of petroleum products competitive and affordable.

He explained that although the NPA maybe justification for introducing price floors; the consumer’s interest is paramount and the determination of prices of petroleum products should be left to individual sellers in order to benefit consumers.

"In a way the NPA may have a certain justification but for us as consumers it may be really, really not a good thing and the market should have been allowed to evolve and petroleum companies must be allowed to determine their own prices,” he noted.

 
NPA announces second pricing window

The National Petroleum Authority (NPA) last week announced a new Price floor for the second pricing window, from October 16 to 31. The authority set GH₵12.73 for petrol and GH₵13.43 for diesel. The development means that no oil marketing company should be selling below the price quotes.

The NPA in the notice to the Oil Marketing Companies (OMCs) and Liquefied Petroleum Gas (LPG) marketers advised all the players to comply with the above price floors for the window. It added that the price floors exclude the premiums charged by International Oil Trading Companies (IOTCs) and the operating margins of BIDECs, as well as the Marketers’ and Dealers’ Margins of OMCs/LPGMCs.

That will be independently determined by the companies as pertains under the Price Deregulation Policy.

The NPA introduced the price floor mechanism to check price undercutting in the industry. It stated that the practice if not checked could threaten the stability of the industry. The NPA recently announced it has suspended the Price Floor programme for the Bulk Oil Distribution Companies.

This was based on some concerns expressed by the players in that sector. However, it is still going ahead with the programme for the oil marketing companies.

The programme has faced some criticism from some players in the industry, who have described the policy as an anti-free market programme.

The NPA insists the roll out of the price floor policy was based on industry consultation and recommendation by players on what steps must be taken to deal with price undercutting

Review of Gold for Oil

Mr Duncan Amoah challenged the government to take a second look at the Gold for Oil policy.

He argued that the placement of a huge amount of forex reserve into the hands of the Bost Oil Storage and Transportation (BOST) an importer to the detriment of the over eighty per cent of Bulk Oil Distributing Companies (BDCs) makes it difficult for these BDCs to seek foreign exchange in the open market to import fuel hence the upsurge in the exchange rate with it attendant increment of fuel prices.