Even though crude oil price is below $50 a barrel, Ghanaians will have to brace up to pay more for petroleum products as government is set to review the pricing formula for petroleum products to include mitigation levy, which will increase the price of petroleum products.
Already, Special Petroleum Tax of 17.5% was imposed on selected petroleum products in November last year.
Currently, the cost of levies, VAT and distribution margins sum up to 42.10% and 39.87% on the prices of petrol and diesel respectively, according to industry watchers.
Mitigation levy will only increase these percentages and further worsen the deteriorating living standards being experienced currently.
Oil prices have dropped by nearly 60% since June as production around the world has soared, outstripping demand at a time of lacklustre global economic growth.
However, Ghanaians have enjoyed 12% in the prices of petroleum products, a reduction some critics have been quick to rubbish.
This sharply contradicts the expectation of Ghanaians, who should be paying far less for petroleum products due to the fall in crude oil prices.
The severe impact of these taxes will be felt when prices of crude oil begin to rise.
The current pricing formula includes crude oil prices, exchange rate, taxes and margins. A change in any of the indices automatically affects the price of the product.
President John Dramani Mahama first suggested the introduction of the mitigation fund that would cushion consumers when the price of the commodity skyrockets.
Finance Minister Seth Terkper, at a press conference last Friday, affirmed the President�s suggestions when he said that the inclusion of the mitigation fund would ensure that government saves enough money when prices of petroleum tumble on the world market, adding that when prices rise, government will then fall on the fund to cushion consumers.
�In the new pricing formula, there is a mitigation account which makes the automatic adjustment operate within a corridor where you build up the stabilisation fund for the automatic price adjustment as prices are going down and you fall on them when prices go up.�
From all indications, government is focused on mitigation levy, which would increase the price of petroleum products.
However, Civil Society Organisations (CSO) and some experts in the petroleum sector have kicked against the mitigation levy.
Former Chief Executive of the NPA, John Attafuah described as unnecessary plans by government to slap another levy on petroleum products.
Energy think-tank, African Centre for Energy Policy (ACEP) has also described as �irrelevant� President Mahama�s proposal for a new levy to be slapped on petroleum products.
According to ACEP, the introduction of a new tariff on fuel products will only worsen the plight of the Ghanaian.
Director of Programmes at ACEP, Benjamin Boakye insisted his proposal was irrelevant.
�I am saying it is not relevant because you cannot manipulate oil prices from Ghana and you cannot save so much to be able to mitigate future price rise, so what you do is to allow the market to dictate the prices.
�In other jurisdictions, what you do is that world prices rise so much above what people can bear; you rather try to cushion people by reducing taxes on the product, but in our case we decided to take more taxes; and after taking more taxes, we are proposing another fund to get more from customers, and as consumers that is not fair,� he said.
The Integrated Social Development Centre (ISODEC) is cautioning government against the planned introduction of a new levy on petroleum products.
Campaign co-ordinator at ISODEC, Dr Steve Manteaw said government must tread cautiously.
�As regards the pricing of the petroleum product, I think we�ve all agreed as a country to allow the market to determine, and so government should keep faith with the policy. If it intends to change the policy, it should let us know.
��This policy inconsistency is not good for building public trust in government,� Dr Manteaw added.
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