Ghana's Parliamentary Select Committee on Energy has agreed to examine the policy requiring domestic refineries to pay for the country's crude oil in US dollars. This policy has been criticized for straining refiners' foreign exchange position, particularly at a time when the cedi has been volatile. The committee's review comes after Sentuo Oil Refinery, a local refinery, called for the policy to be changed, arguing that it exposes them to unnecessary currency risk.
The current policy requires Ghana's refineries to pay for local crude oil in US dollars, even though the oil is produced within the country. This means that refiners must source hard currency on top of managing normal production costs, which can add to foreign exchange pressure. The committee's review aims to understand the impact of this policy on domestic refining operations and the broader energy sector.
The review is part of a broader effort by the Ghanaian government to reduce reliance on the dollar in strategic sectors. The government has been working to cut down on foreign exchange dependency in sectors such as energy, with state entities like the Ghana National Petroleum Corporation (GNPC) and the Ghana Gold Board (GoldBod) playing a role in these efforts.
The committee's engagement with Sentuo Oil Refinery management is an early step in the review process. The committee can gather evidence, question officials or companies, and make recommendations to the full House. However, no timeline has been given for when the review will be completed or when any changes to the dollar-payment requirement might be proposed.
The policy has been criticized for potentially passing on costs to consumers. Critics argue that the costs absorbed by refiners in securing dollars could eventually filter through to pump prices. However, there is no indication that fuel prices have already been affected.
The National Petroleum Authority (NPA) has previously expressed concerns about the impact of the policy on local refineries. The NPA's boss has also called for a more active state role in public transport. The committee's review is expected to consider these concerns and examine the impact of the policy on the energy sector as a whole.
The outcome of the review is uncertain, but it is clear that the policy is having a significant impact on domestic refining operations. The committee's findings and recommendations will be closely watched by stakeholders in the energy sector, including refiners, consumers, and government agencies.
Key points
- The policy requires Ghana's refineries to pay for local crude oil in US dollars, adding to foreign exchange pressure.
- The review aims to understand the impact of the policy on domestic refining operations and the broader energy sector.
- The committee's findings and recommendations will be closely watched by stakeholders in the energy sector.
