[ 2016-01-06 ]

Fuel price hikes shows economy is mismanaged—Economist
A Senior Lecturer and Economist at the University
of Ghana, Dr. Ebo Turkson, has questioned the
rationale behind the recent fuel price hike,
noting it is an indication of economic
mismanagement.

Prices of various petroleum products have seen a
27 percent jump since the beginning of the year
amidst stability in the cedi and the continuous
decline in world prices of crude oil.

Even though a barrel of crude oil on the world
market as of yesterday was $38, as against $100 in
June last year, consumers in Ghana now pay about
GH¢15 per a gallon of fuel, while in the United
States of America (USA), a gallon of petrol is
sold at just about $2 (about GH?8).

In an interview with the B&FT, Dr. Turkson said
the situation cannot be explained and understood
by experts, thereby indicating a mismanagement of
the economy.

“I am not too sure why this decision was made
considering the fact that world oil prices have
fallen and most countries that import oil have
rather reduced their fuel prices.

That is what we were expecting in this economy so
that if utilities have increased then fuel cost
must reduce so that consumers will not feel too
much the impact of the increment in the utility
prices.

But we have rather seen fuel prices being
increased.“It doesn’t define the direction of
this economy and some of us tend to believe that
the economy is being mismanaged.

I am not sure whether any analysis was carried out
before implementing policies as these which have
negative impacts on the economy,” he said.

Dr. Turkson further stated that the timing of the
increment will worsen the livelihood of residents
in the country since it comes at a time where
Ghanaians have not fully recovered from the
utility tariff hike barely a month ago.

“The fuel price hike will increase the cost of
living in the country since transportation forms
part of the major expenditure of workers, and
coupling the fact that there has not been increase
in the real incomes of consumers, the income
levels of workers will further decline especially
at a time that utility tariffs were increased not
long ago,” he said.

Government in the 2016 budget has targeted end of
year inflation rate of 10.1 percent, however, Dr.
Turkson believes the target cannot be met since
the recent fuel price hike will cause inflation to
increase.

“The cost of transformation forms part of the
factors in the consumer basket which affects the
prices of goods and services.

So if fuel price increases, it will automatically
increase the prices of goods and services,
thereby, increasing inflation.“What it means for
producers is that the cost of production will also
increase.

And those firms who export will no longer be
competitive compared to other firms who are
outside Ghana. Domestic firms that produce locally
will also see increase in their cost of production
and that will lead to increase in the prices of
their products.

“What it means is that imported goods are going
to be cheaper than locally produced goods. So if
we want to encourage the consumption of domestic
goods then we must decrease the cost of production
in the economy,” he said.

Another twisting development to this story is a
report by the Parliamentary Select Committee on
Finance which has revealed that Parliament
approved a 5.18 percent increase for the price of
petrol, 2.90 percent for Gas Oil and 1.74 percent
for LPG.

What this means is that the fuel prices were
supposed to go up not more than five percent.
However, the situation turned out to about 27
percent at the pumps.

This, the Chief Executive of the Chamber of the
BDCs, Senyo Horsi, in an interview with Citi Fm,
an Accra based radio station, insisted the
introduction of new taxes by government are solely
responsible for the situation at hand.

“As a matter of fact, BDCs have reduced their
prices in the last few weeks in tandem with the
world market trends.

We respond to the world market and that’s how we
price oil marketing companies. The situation you
have at the pump is just a reflection of the
impact that the new taxes have had on the ex-pump
price.

The taxes are quite many and a number of them too
get taxed on another tax, so it has some extra
impact,” he said.

Source - Bus & Fin Times

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