The Chief Executive Officer of the Chamber of Oil Marketing Companies (COMAC), Dr Riverson Oppong, has warned that government’s fuel subsidy interventions could eventually become a financial burden on consumers if they are not supported by a sustainable funding mechanism.
He said although subsidies could offer immediate relief to motorists and other fuel consumers, the cost of maintaining them could eventually be passed on to households and businesses through other charges.
Dr Oppong was speaking on Channel One TV’s The Point of View on Monday, September 14, amid the government’s GH¢2-per-litre subsidy on diesel and calls for a similar intervention on petrol.
He cautioned against creating what he described as “buffers” without clearly identifying the resources to finance them, arguing that such interventions could create liabilities that would have to be settled in the future.
“For me, for a developing country like Ghana, giving buffers is very dangerous. Giving buffers is very dangerous because at the end of the day, you and I are going to pay for this in one way or the other,” he said.
‘WHO PAYS FOR THE SUBSIDY?’
Dr Oppong said the critical issue was not necessarily whether government should intervene to cushion consumers, but where the money to finance the intervention would come from.
He expressed concern that if the subsidy was financed in a manner that affected the operational finances of companies within the downstream petroleum sector, it could create additional challenges for businesses.
“I’m not against it. Don’t get me wrong because I’m also a consumer. But where is it coming from? If it’s going to hit the operational account of the industry, that I have a problem,” he said.
He therefore urged government to identify sustainable revenue sources to fund fuel interventions rather than allowing the cost to accumulate and emerge as a future financial obligation.
ELECTRICITY SECTOR LESSON
The COMAC CEO cited Ghana’s experience with the electricity sector as an example of the potential consequences of maintaining prices below sustainable levels without adequate financing.
He argued that interventions intended to shield consumers from the true cost of electricity eventually resulted in financial liabilities that had to be absorbed elsewhere.
“It happened with the electricity market,” he said, adding that “years go by and what happened? We saw that we were paying for unrealistic electricity prices.”
Dr Oppong said the same principle could apply to fuel subsidies if their financing was not properly structured.
He warned that consumers could enjoy short-term relief at the pump only to face higher costs through other charges in the future.
His comments come as pressure mounts for government to extend its fuel subsidy measures beyond diesel to petrol, with consumers facing the impact of fluctuations in international oil prices and domestic fuel costs.
