The National Petroleum Authority’s (NPA) introduction of a floor price in Ghana’s petroleum market was intended to stabilize prices, prevent predatory pricing, and ensure the sustainability of Oil Marketing Companies (OMCs). However, a close analysis of the pricing structure reveals excessively high OMC margins often hidden in plain sight placing an unfair and disproportionate burden on consumers as well as undermining the very objective of fair pricing that the NPA seeks to protect.
The data from a recent industry breakdown clearly illustrates this problem. Let’s take petrol as an example. The combined BDC price (Gh¢5.4/L) and Taxes, Levies & Margins (Gh¢4.27/L) result in an Ex-depot price of Gh¢9.67/L. This is the baseline cost before OMCs add their own retail margin.
Yet, the retail prices charged by major OMCs tell a different story. Star Oil sells at Gh¢9.97/L, implying a modest margin of Gh¢0.30. However, Goil, Vivo (Shell), and Total Energies all retail at Gh¢10.99/L, extracting a significant margin of Gh¢1.32 per litre. For diesel, the disparity is similar, with major brands like Goil, Vivo, and Total charging Gh¢11.96–11.99/L against an ex-depot price of Gh¢10.75/L, yielding margins of Gh¢1.21–1.24/L.
While a margin is necessary to cover operational costs including transportation, staffing, station maintenance, and a reasonable profit, the scale of this gap between ex-depot and retail prices raises critical questions with respect to wide variation in margins where some OMCs margins are three to four times higher than others.
This is where the floor price policy becomes problematic. Instead of fostering competition that benefits the consumer, it effectively sanctions these high margins by ensuring no company can sell below a certain threshold. In practice, it removes the pressure for efficient operators with lower costs to pass savings to consumers. Instead, it creates a price umbrella, under which all OMCs especially the dominant players comfortably maintain inflated margins without fear of being undercut.
The current fuel pricing regime, shielded by the floor price mechanism, allows for margin inflation that harms the Ghanaian consumer and economy. The significant and varying margins extracted by major OMCs are a major driver of the pain at the pump. The NPA must recalibrate its approach. True market stability will not come from protecting high margins but from fostering a transparent, competitive, and efficient market where fair prices are driven by operational excellence, not regulatory shielding.