What determines fuel prices at the pump?

Ever wonder what goes into the prices of petrol and diesel you see at filling stations? Here’s a simple breakdown to help you understand.

In Ghana, fuel prices at the pump are made up of three main components:

1. Ex-Refinery Price
2. Taxes and Levies
3. Oil Marketing Company (OMC) Margin

1. Ex-Refinery Price (Ex-Ref)

The Ex-Ref price is the cost at which Oil Marketing Companies (OMCs) purchase fuel from Bulk Import, Distribution, and Export Companies (BIDECs) before selling it at the pump. Ghana has over 40 BIDECs and 150 OMCs operating in the downstream petroleum industry.

Unlike OMCs, BIDECs are licensed to import petrol and diesel from international oil trading companies such as Repsol, Trafigura, BP, and Vitol.

The Ex-Ref price accounts for approximately 75% of the total pump price and is influenced by:

• Global crude oil prices
• Exchange rate fluctuations (particularly the cedi to the US dollar)

2. Taxes and Levies

Currently, 11 different taxes and levies are imposed on fuel prices. These are collected by various state agencies, including the National Petroleum Authority (NPA), Ghana Revenue Authority (GRA), and Bulk Energy Storage and Transportation Limited (BEST, formerly BOST).

The taxes and levies include:

1. Energy Debt Recovery Levy
2. Road Fund Levy
3. Energy Fund Levy
4. Price Stabilization and Recovery Levy
5. Sanitation and Pollution Levy
6. Energy Sector Recovery Levy
7. Special Petroleum Tax
8. Primary Distribution Margin
9. BOST Margin
10. Fuel Marking Margin
11. Unified Petroleum Pricing Fund

These taxes and levies make up approximately 20% of the final pump price.

3. OMC Margin

The OMC margin, which contributes about 5% of the pump price, is the portion set by Oil Marketing Companies to cover their operational costs and profits.

Even though the market is deregulated, meaning OMCs set their own prices, the NPA provides pricing guidelines by establishing minimum price floors.

The next time you’re at the pump, remember that fuel prices are determined by a combination of global market forces, government taxes, and the margins set by retailers.

EX-REF PRICE OUTLOOK (1^ST – 15^TH MARCH 2025)

PETROL: -1.38%

DIESEL: +1.29%

NPA PRICE FLOOR (1^ST – 15^TH MARCH 2025)

PETROL: GHS12.39

DIESEL: GHS13.59

Article by: Desmond Ogbarmey-Tettey

(Energy Analyst)

Source: npa.gov.gh