RE: Fuel Prices To Increase by 8%

Does it make any economic sense at all ?
The general news of Friday July 27th 2007, on Ghana web hinted that prices of petroleum products will be adjusted by the beginning of August, following the surge in world market prices of crude oil. This hint was dropped by the chief executive officer of the National Petroleum Authority (NPA) Mr. JOHN ATTAFUAH.

A gallon of petrol, which sells at 4.2180 new Ghana Cedis, will go for 4.5847 new Ghana Cedis if the price is reviewed upwards. Speaking to the Business Chronicle on its second anniversary celebration in Accra on Wednesday, 25th July, Mr. Attafuah said it is obvious that prices of petroleum products will be increased because crude oil has been rising on the world market.

No matter what anybody says, the question Ghana National Party and this writer are asking is:

DOES IT MAKE ANY ECONOMIC SENSE?

Let’s examine the logic. With the government huge taxes on petroleum products, does it make sense to increasing prices of petroleum products any time the world market price goes up?

I know that some will be surprised and take me on, asking this question. Those are the people who thinks as long as Ghana do not produce crude oil, prices must by all means be adjusted when world crude prices fluctuate. However, in all sincerity, the answer is absolutely a BIG NO; unless somebody can refute a reliable documentary proof I have that the cost of producing one gallon of petrol from the Tema oil Refinery (Ex Factory Price) is nowhere close to C14,000 Cedis. Currently, a gallon of petrol in Ghana sells at C42,180.

WHAT A BIG DIFFERENCE.

Over 25.180 Cedis is paid per gallon as taxation, considering a marginal marketing profit of 3,000Cedis per gallon for the station owners.

Throughout the world, everybody knows the prices of petroleum products dictate the prices of goods and services. In Ghana, the margin of increases are always high which affect transportation prices; eventually this affects prices of everything from food, clothing, utility tariffs and labor. Who suffers? The ordinary and the poor working people who are already over taxed and economically enslaved in their own country.

Let’s examine how these petroleum price increases, which are nothing more than high taxes, are unreasonable and counterproductive. Every Ghanaian has been a witness to the rampant demands for salary adjustments in the country each time there is petrol price increase, resulting in increases in prices of goods and services. These increases in salary demands have always led to very serious industrial strikes. Hospital staff and Medical Doctors have repeatedly laid down tools in demand for corresponding salary adjustments to the cost of living in the country. Hundreds of preventable deaths are recorded nation wide as a result .

Now this is why I think it does not make any Economic sense increasing prices of petroleum products every time the world crude prices go up. Besides normal Trades Union bargaining negotiations that sometimes ends into industrial disputes, all major strikes have always been the result of hard economic measures of successive Governments especially the ones resulting in high cost of living after increasing prices of petroleum products. Usually, the action starts with the medical Doctors, and by the nature of their responsibilities to society, Government goes to terms secretly with their leaders and are appeased by giving them a portion of the excess money from taxing the petroleum sector of the economy.
Soon after that the Nurses get to know the deal reached between the Government and the Doctors, and a section of the Nurses association also embark on a sit down strike, and gradually it becomes a nationwide action. Government appeases them from the same excess money from taxing the petroleum sector of the economy. As long as the cost of living affects all working and non- working class of the society, the demand for salary adjustments continues, including , GNAT, NAGRAT, POLYTECHNIC TEACHERS ASSOCIATION, CIVIL SERVICE ASSOCIATION, CONSERVERSIVE LABORERS ASSOCIATION, UNIVERSITY LECTURERS ETC, ETC. All these groups manage to get their demands somehow met by Government from the excess taxation of the petroleum sector of the economy.
It is believed that about 75% of the National GDP services the remuneration of workers within the Civil and Public services above. Any demand for salary adjustments therefore brings the equation of any increases on petroleum products to almost zero, and therefore economically and even politically counterproductive. It is not very smart. With the known Ex. factory price of one gallon of petrol less than C14,000, why can’t Government keep prices of petroleum products down to a reasonable level? Even if Government gains by increasing petroleum prices, I still don’t think it makes any economic sense because high and unbearable cost of living in any country increases inflation rate, makes goods and service more expensive, reduces peoples standard of living, and every Government unpopular and consequently an unstable society.
Because of the high cost of living in the Country, even though salaries of Doctors Teachers, Nurses and all sectors of the economy have been increased, people are still complaining of intolerable hardships. Cost of living in Ghana is not a joke at all. A typical bag of grocery has about 90% of the food and toiletries and basic needs imported. If one adds the cost of petrol maintenance of vehicles, wear and tear on vehicles due to the poor roads, the cost of living in Ghana, is actually far higher than in California and other developed economies, except for housing. (According to statistics by Dr. Kwaku A. Danso in his book on leadership concepts and the role of Government in Africa. The case of Ghana 2007). However, because policy makers enjoy everything free they do not care a bit about the rest of the citizenry.
One can only conclude, and in my opinion, that Government must leave prices of petroleum products where they are now with the possibility for future price cut. They should instead sit up and look at ways to spread the National Tax net wider, tighten all the loop holes in over-invoicing and expenditures within the system, reduce government expenditure on luxury vehicles and lifestyle of elected officials, and we can find money to balance the 8% increases Government is looking from the petroleum products. This increase in fact will ultimately further aggravate the already unbearable conditions in the Country. Government officials do not buy petrol and enjoy other privileges free so what do they care? Let us examine one area that the government is ignoring to help Ghanaians check financial irregularities and abuses in the system.

Freedom to Know the Truth – The Freedom of Information Bill

If the freedom of information Bill was passed and signed into law by the Legislature and the President, our democracy will allow some of us to ask a few questions.
Example: A Government official should explain to us Ghanaians why it should Cost 36 Billion Cedis to set up Telephone and Broad Band Internet Services for twenty one (21) NPP officials allegedly out of State Funds? How crazy can that be? And our government tells us we don’t have money! borrowing every day on behalf of the people, to have a Ghana@50 celebration, borrowing to build a Presidential mansion, borrowing to build roads? And in fact borrowing for all projects you can think of. How long should we wait to have the freedom of information bill passed? Why not now? Why shelve it if the NPP and the Government are not guilty of any wrong doing?

Ghana is not a poor country. We have too much wealth for a population of just twenty million people. However, mismanagement and lack of accountability, selfishness and greed at the corridors of power are our national bane. Even though many people both in and outside know these, yet, not too many are concerned about Ghana anymore. They may think, well, let the old traditions grind it to the bottom. Fellow Ghanaians, (Wo se aki Nye wo de a, Eho ara na wo tafere) Ghana is the only Country we have so let us sacrifice to make it better.

The expected 8% increase is only additional taxation that is going to place further economic burden on the people of Ghana, and not cost recovery as we are made to believe. Government should therefore absorb any future crude oil price hikes because the sector is already too much overtaxed. The purpose of the new political party, GNP, is to bring these issues to the fore and help change the politics of old and make politics a public service where officials really and sincerely serve the interests of the people of Ghana.