Star Oil Ghana CEO, Philip Tieku, has criticised the National Petroleum Authority (NPA) for introducing a price floor for petroleum products, describing the move as an admission of weakness within the downstream sector.
Speaking on JoyNews’ PM Express Business Edition on Thursday, November 6, he said a competitive market should not require price floors or ceilings, unless the regulator believes that some industry players lack proper governance systems.
“When the price floor was instituted, I openly wrote against it, because I don’t really believe that in a competitive market there’s any need for a price floor or even a price ceiling,” he said.
“You want players to be able to operate their businesses efficiently, unless the regulator believes that the players in the industry do not have the right governance systems.”
He explained that setting a price floor suggests that the regulator doubts the capacity of oil marketing companies (OMCs) to make sound business decisions.
“If that’s an admission of poor governance systems in our industry and the fact that some players need to be protected, or they make bad decisions around their pricing, then that’s fine,” he said, “but I wrote against it in principle that in a competitive market, you can’t have a price floor.”
Mr. Tieku pointed out that recent incidents involving fuel meant for export being diverted for local sale have complicated market conditions.
“About a week ago, you saw a GRA news article where some exported products were diverted or were going to be diverted and sold in some of our stations locally,” he said.
“When people avoid taxes on the product, they are able or they want to sell it very quickly. And the taxes on fuel today are about ¢4.27 per litre for gasoline.”
He warned that such diversions create unfair competition, as those avoiding taxes can afford to sell at significantly lower prices.
“If you have somebody diverting a product meant for export into Burkina Faso and selling it at the filling station in Ghana, already they have a ¢4.27 margin to play with. Such a person can drop the price to ridiculous levels, and that can have its own effects,” he added.
Mr. Tieku conceded that in such instances, a price floor could play a minor role in stabilising the market.
“In that respect, that’s the only area I see the price floor as playing some role if such a person should get their hands on those products. They may not be able to sell lower than the price floor, but otherwise, I really don’t see the benefit of the price floor.”
Responding to suggestions that some OMCs might collapse without such protection, the Star Oil CEO said that the argument only exposes a deeper problem.
“If the regulator argues that way, then it’s an admission that a lot of players in the industry don’t know their business or are not able to analyse their business in terms of costs, revenues and probability,” he said.
He compared the situation to the banking sector, arguing that regulators would never license institutions without sound governance systems.
“The Bank of Ghana is not going to license clueless banks. It’s going to make sure that these are banks that have good governance controls. So if they are making certain pricing decisions, they know what they’re about.”
Mr. Tieku maintained that Star Oil was profitable before the introduction of the price floor.
“As I’m sitting here, at the time the price floor was introduced, nobody could say that Star Oil was not profitable. We’re profitable. We’re not selling at a loss.”
He stressed that regulators should focus on strengthening governance and enforcing compliance rather than imposing market controls that distort competition.
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