Oil marketers’ action smacks of cartelism - ACEP

The Africa Centre for Energy Policy (ACEP) has questioned the motive behind the simultaneous increase in prices of petroleum products by top Oil Marketing Companies (OMCs).

The energy policy think tank said the increase in the price from GH¢5.40 to about GH¢6.05 was “intriguing, questions the effectiveness of the deregulation effort and points to an apparent cartelisation of the oil marketing space”.

In a press statement that broadly denounced the recent increment in prices of petrol, diesel and other refined petroleum products, the centre said the action could be an indication that oil retailers were consenting on prices in contradiction of the requirements of the deregulation policy and best industry practices.

Giving a breakdown of the increment in the price, the statement said the upward adjustment was not all tax-related.

According to ACEP, 26 pesewas was introduced by price movement on the international market and OMCs’ margin.

It said the decision by all the major OMCs to upwardly adjust their margins simultaneously was a cause for alarm as it defeated the liberty that deregulation gave to each firm to play with price.

“The OMCs had the liberty within the confines of deregulation to adjust their margins as often as dictated by the market conditions. Yet, they decided to wait until new taxes and margins were imposed to implement a unanimous adjustment of 16 pesewas,” the centre noted.


Price deregulation

In June 2015, the National Petroleum Authority (NPA) introduced the deregulation policy that allowed OMCs to unilaterally determine prices of fuel at the pumps.

The action brought to an end an age-old practice in which the NPA was the only institution allowed to set prices for the retailers.

The deregulation was envisaged to allow flexibility in price setting, promote consumer welfare and usher in a keen competition in an area that had been heavily regulated.

But since then, ACEP said the structure of the OMC business had not helped in realising the expected gains.


Market concentration

“The concentration of market power in the hands of few OMCs is responsible for the behaviour of the OMCs,” the centre said in reference to the simultaneous increase in prices.

“Out of the functional 116 OMCs, five of them control about 52 per cent of the market. This is a product of a hypocritical liberalisation operated in the last decade, which is heavily regulated behind the scenes by politics for entry into the market.

“As a result, many ‘capital-anaemic’ companies have sprouted over the years and left the market to the control of a few. The fundamental question is: where is the regulator in tracking market power concentration and anti-competitive behaviour in the downstream business?” the ACEP asked.


Earlier accusations

This is not the first time an institution is alleging price fixing among OMCs for consumers.

In March last year, another think tank, CUTS Ghana, said the decision by the Association of OMCs (AOMC) at the time to defer price increases contravened Section 44 of NPA Act (2005), Act 691.

Its Country Director, Mr Appiah Kusi Adomako, said consumers were yet to feel the expected benefits of the price deregulation following a single position approach adopted by the AOMC, the umbrella body of the retailers, on pricing and product supplies.

“With the emergence of price deregulation, one would expect consumers to feel the impact of the fall in the crude oil prices, coupled with the appreciation of the Ghanaian cedi against the US dollar. However, the concerted effort by the AOMCs to agree on an average percentage price reduction and then deferring the time for such a reduction constitutes price-fixing, which is an offence under Sub-Section 3 of Section 44,” he said.

He explained that the sub-section prohibited persons and institutions from colluding to fix prices, an action he said appeared to have been pushed by the association.

The AOMC has often denied allegations of collusion and price fixing, insisting that its members were independent in their actions, including the setting of prices.