The Association of Oil Marketing Companies
(AOMCs) on Saturday stated that full deregulation of the petroleum market was the key to unlocking the nation's intermittent fuel shortages debacle.
Mr. Kwaku Agyemang-Duah, AOMCs Industrial Coordinator, told the Ghana News Agency in an interview at the weekend that, the lifting of certain governmental interventions such as price control on several aspects of the oil industry would eliminate undue government interference in the pricing, export and importation of oil products and the establishment of retail
outlets.
He said a deregulated regime would also empower oil marketing companies to import petroleum products directly from foreign suppliers, which would enhance competitiveness on the market.
He explained however that a deregulated regime does not mean that
government would loose all power and responsibility over the industry.
"While importers can import the volume they need and from whatever source, they would have to notify the NPA of intention, deeds and processes
of any importation."
"The importer also needs to make sure that any importation conforms to international standards of quality and specifications, Mr. Agyemang-Duah stated.
He debunked the notion that deregulation would lead to fuel price hikes, stressing that deregulation will rather make the industry more
competitive and offer the customer alternatives as to which fuel station or
company to patronise.
Mr. Agyemang-Duah said on the contrary, deregulation and competition
would encourage oil companies to be more effective and efficient; they would
be compelled to improve their service.
"Under a regulated set-up, however, domestic oil companies have few
reasons to strive to meet "world class" standards because the oil companies
are guaranteed returns on their investments hence there is no incentive for
them stretch to provide customers with better services."
He said: "However, under a deregulated environment, the industry
players would have to compete aggressively against each other for customers
and consequently, returns on their investments".
On the other hand, it should be noted that with the deregulation of the
industry, the industry participants cannot resort to malpractices such as
violating environmental laws or underfilling of LPG cylinders, he stressed.
According to Mr. Agyeman-Duah, in a deregulated regime, competition
determines the price at the retail level.
"For instance, if a new industry player puts up a station in a particular
area, that new station may choose to drop its price to garner market share
and seek customers. To avoid losing market share and volume, other stations
in that area, whether established or otherwise, may choose to match the
price adjustment."
He said:" On the other hand, if a particular player increases its price
and other competitors notice that sales are not affected, that player will
stick to its price. But if that player suffers a drop in sale volume, it
will have no recourse but to align its price with other competitors in a
particular area."
Mr Agyemang-Duah emphasised the need to deregulate the industry, saying
under a regulated environment, prices are not allowed to rise and fall with
market levels.
This means that when prices went up, government had to dole out money
to make up for the difference between the old and the new prices, which has
lead to the accumulation of debt.
But with the deregulation of the industry, government would be able to
use the money for vital services and infrastructure, such as school
buildings, bridges, roads, and hospitals, he said.
Mr Agyemang-Duah said the chronological events for Ghana to deregulate
started as far back as April 1993 with the Reconstitution of the National
Petroleum Tender Board (NPTB), through to the establishment of a Five-Member
Board of NPTB chaired by Mr W. S. Parker in 1996.
He said after the establishment of the Board, the process was stalled
forcing the OMCs in November 2000, to write to the government on the
Petroleum sector's challenges and recommended a time table towards
deregulation.
According to him, in March 2003, Government reconstituted NPTB with
Professor Ivan Addae-Mensah as chairman, which lead to a meeting with OMCs
on accelerated deregulation programme and the drawing up of a road map to
deregulation of the oil industry.
Mr Agyemang-Duah said as part of the road map, a National Petroleum
Planning Committee was inaugurated in March 2004 after which the first
tender of the importation of finished products took place under a
deregulated regime.
In July 2005, a Nation Petroleum Authority was inaugurated to replace
NPTB, and the implementation of the NPA Act 691.