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The Gold for Oil Policy cannot serve as a comprehensive solution to the underlying challenges impacting fuel supply within Ghana’s petroleum sector, even if it has contributed some benefits, the Chamber of Oil Marketing Companies (COMAC) has said.
The Gold for Oil (G4O) programme, introduced by the Bank of Ghana, was launched in December 2022 with the objective to stabilise fuel prices by exchanging gold for petroleum.
In a report titled: ‘Gold for Oil or Gold for Forex,’ made available to the Ghanaian Times, COMAC said the country needed long term strategy to addressing the challenges facing fuel supply and volatilities in fuel prices in the downstream petroleum sector.
COMAC indicated that the country must also prioritise structural reforms that addressed the root causes of its economic vulnerabilities.
“Moving forward, a shift in strategy is necessary. These include: strengthening refining capacity, investing in domestic refining infrastructure will reduce reliance on imported refined petroleum, insulating Ghana from global supply chain disruptions and enhancing storage and distribution,” it stated.
COMAC also stated that Ghana remained dependent on imported refined petroleum products due to the inefficiencies at the Tema Oil Refinery (TOR).
“The Gold for Oil Policy does not change this fact. Ghana still lacks adequate strategic fuel reserves, making it vulnerable to global supply chain disruptions due to fuel storage deficiencies,” it said.
Additionally, COMAG noted that the Gold for Oil programme could be credited with reducing ex-pump prices during that period, saying, it studies on the sector found out that crude oil prices had already been declining, dropping from $96.04 per MT in the second pricing window of November 2022 to a new low of $74.27 per MT by June 2023.
“Similarly, international market prices reported by Platts for petrol and diesel fell from $968.25 and $1,096.98 per MT to $828.70 and $691.41 per MT, respectively. Consequently, ex-pump prices mirrored the downward trend in international markets. Petrol and diesel prices fell from GH¢16.57 and GH¢23 per litre, respectively, in the first pricing window of needs
November 2022 to GH¢11.90 and GH¢11.96 in June 2023, as illustrated in Graph 4. This supports the view that the international market played a significant role in reducing prices well before the initial Gold for Oil Policy import reached the Ghana domestic market,” COMAC explained.
Again, the report said since its implementation in January 2023, the Gold for Oil Policy had covered only 30 per cent of Ghana’s oil needs; a limited scope that raises doubts about its effectiveness in addressing key economic concerns such as fuel price stability, currency depreciation, and inflation in petroleum-dependent sectors.
“While the Gold for Oil initiative was introduced as a temporal measure to alleviate Ghana’s foreign exchange pressures, its execution (with the oil import element) has raised significant concerns regarding transparency, effectiveness, and long-term sustainability. The policy’s limited reach; covering only 30 per cent of the nation’s oil needs has failed to deliver substantial relief to fuel prices, stabilise the currency, or curb inflation in petroleum-dependent sectors,” COMAC outlined.
“Our findings also indicate that BOST was given priority in Laycan allocations for Gold for Oil supplies over BIDEC imports. Consequently, due to declining Gold for Oil import volumes, many of these Laycan allocations went unused. This inefficiency placed additional strain on BIDECs, who struggled to secure their own Laycan slots, leading to potential demurrage costs,” it added.
