The Chief Executive Officer of the Chamber of Bulk Oil Distributors, Senyo Hosi, says Ghanaian petroleum consumers are not paying realistic prices for the fuel they consume.
According to him, all things being equal, the price of fuel at the pumps should be higher than they currently are.
He noted that the players in the petroleum supply chain are the ones cushioning the Ghanaian consumers, and expressed worry this might have disastrous consequences for the supply chain players soon.
Speaking on JoyNews’ PM Express Business Edition, he noted that the Bulk Distributing Companies and the Oil Marketing Companies have recorded huge losses in the first half of this year, and if no solution is quickly proffered, it might continue into the second half.
“The truth of the matter is we are not paying realistic prices, you have a lot more people trying to speculate so sometimes as prices are supposed to be adjusted high, people are not or they will stock a lot more and hope that the next window they recover.
“The truth is this particular half-year has ended with a lot of massive losses within the BDC and maybe within the OMC subsector. It is sometimes mind baffling when you see the rates that are actually on the pump.
“You look at the exref prices, the taxes are not supposed to be added, I sometimes wonder how the oil marketing companies have been coping. And the BDCs if you look at what they have and you look at the market rate; you’d realize that there is going to be a challenge,” he said.
He stated that to cushion the effects of the losses some of these players are trying to get as close to cash as possible; a situation he says is unsustainable.
“So what some of them are doing now and why people are trying to convert closer to cash; when you get closer to cash, the fx risk or the depreciation provision you make in your exchange rate assumption will become less or close to zero.
“You can negotiate an exchange rate today and maybe get 8.25, you don’t need to use 8.5 as a forward rate, you’ll use 8.25. You’ll collect it now, but possibly you could take that and invest it over the next 30 days and it may compensate for some of the losses you’d have made.
“So all kinds of models are being juggled by the players. But where I sit, these are not sustainable solutions, so we’d have to put structures that make the market reflect the price,” he said.
“There are two things that happen, if the players fail, the entire supply chain will also fail, if the supply chain is failing, the IOT confidence in our confidence in our market will also fail. So the ultimate cost will be quite high as a country,” he added.
“So we need to make sure our prices are a bit more realistic and there’s room for regulation. But it is difficult for regulators; when you’re seeing prices lower than they should be you’re happy because consumers will pay less, the only thing is that in the long run the players who are supposed to sustain supply may have challenges doing it in the future,” he said.