Petroleum Product Pricing, Deregulation and Subsidies in Ghana: Perspectives on Energy Security

This paper reviews Ghana’s recent experience with downstream petroleum products pricing and deregulation and looks at its implications for the nation’s energy security needs. The Government of Ghana in June 2015 put in place a deregulation policy that had the expectation of allowing marketers and importers of petroleum products to sell directly to consumers by setting their own prices. The policy has the primary objective bring an end to government subsidies on the product which arises in from exchange rate losses and consumer subsidies. The study welcomes government’s decision to revert to the competitive market forces using automatic price formulation as this removes implicit subsidization and its distortionary effects on the economy. With the advent of full deregulation, the burden of managing forex risks will shift from the government to the BDCs and TOR, and any such losses will become their prerogative. Petroleum subsidies, if any, should be redesigned and better targeted at the poor in the form of direct cash transfers as well as entrepreneurial skills training to improve their social and living conditions. Subsidies create distortionary effects and further exacerbate fiscal pressures as government has to borrow or tap into its reserves to offset price differentials.