By Samuel Lartey(Prof)
Fuel prices remain one of the most critical factors influencing Ghana’s economic landscape, affecting both businesses and individual citizens. As of October 1, 2024, the Institute for Energy Security (IES) has provided a forecast suggesting that petrol and diesel prices are expected to remain stable or decrease slightly over the next two weeks.
However, the price of Liquified Petroleum Gas (LPG) is projected to rise marginally unless there is external intervention from policymakers. This mixed trend in the fuel market has significant implications for Ghana’s economy, affecting transportation, manufacturing, and daily life across the country.
The global fuel market saw fluctuations toward the end of September 2024, with gasoil and LPG recording price hikes of approximately 1.5% and 3.83%, respectively, while diesel prices experienced a decline. Understanding the ripple effects of these changes on Ghana’s economy, particularly on businesses and individuals, requires a deeper analysis of the factors at play.
The Impact on Businesses
Fuel costs play a pivotal role in the operational expenses of businesses, particularly in industries heavily reliant on transportation, logistics, and manufacturing. Stable or falling diesel prices will provide relief to many companies, especially those in sectors like haulage, public transportation, and agriculture, which depend on diesel-powered vehicles and machinery.
Diesel’s price reduction could translate to lower costs in transporting goods across the country, which could eventually lead to more stable or reduced prices of consumer goods. Businesses that operate large vehicle fleets will particularly benefit from this price stabilization.
On the other hand, the expected increase in LPG prices, without government intervention, could strain industries that depend on it for energy production. Small-scale manufacturing businesses, restaurants, and bakeries, which often use LPG for their operations, could see an increase in their production costs. This may force businesses to pass these additional costs on to consumers, contributing to inflationary pressures, especially in the food industry.
Additionally, Ghana’s service sector, which includes hotels and restaurants, would face higher operating costs if LPG prices rise. This may deter domestic tourism, as businesses might be forced to raise prices for services to maintain profitability.
Similarly, the transport industry, which utilizes LPG-fueled vehicles, could be impacted, leading to potential fare hikes in the coming weeks. The effects of fuel price increases on these businesses could result in reduced consumer spending, affecting overall economic activity.
The Impact on Individual Citizens
For the average Ghanaian citizen, fuel prices have a direct bearing on the cost of living. With petrol and diesel prices likely to remain stable or decrease, vehicle owners, especially those in the middle- and lower-income brackets, may experience some relief. This could allow households to maintain their current transportation expenses without the burden of rising fuel costs, thereby alleviating some financial strain in a period of economic uncertainty.
However, the anticipated increase in LPG prices could have a significant impact on households that rely on it for cooking. In Ghana, LPG is commonly used in both urban and rural areas for domestic purposes.
A price increase could lead to higher living expenses, as families would need to allocate more of their household budgets to fuel purchases. This would be particularly challenging for lower-income households, which already face rising costs in other areas, such as food and utilities.
The higher cost of LPG may also contribute to the increased use of alternative, less efficient cooking methods, such as charcoal or firewood, which are not only more harmful to the environment but also pose health risks from indoor air pollution.
Market Dynamics and the Role of Policymakers
The fluctuations in the global fuel market during late September 2024, which led to the mixed outlook on fuel prices in Ghana, are largely driven by factors such as international crude oil prices, supply chain disruptions, and geopolitical tensions.
Gasoil prices increased by approximately 1.5%, while LPG prices rose by 3.83%, reflecting these external influences. Without policy intervention, such as subsidies or price stabilization mechanisms, the projected rise in LPG prices could have longer-term effects on both the business community and individuals.
The government’s role in cushioning the effects of these price hikes becomes paramount. Policymakers could explore interventions such as targeted subsidies for LPG, especially for households and small businesses that rely heavily on it. Additionally, diversifying the country’s energy sources and promoting the use of renewable energy could reduce the dependence on imported fuel, mitigating the impact of future price hikes.
Conclusion
The fuel price trends forecasted for early October 2024 paint a mixed picture of Ghana’s economy. While businesses and individual citizens may benefit from stable or declining petrol and diesel prices, the expected rise in LPG costs could impose a financial burden on both sectors.
The business community, particularly in the manufacturing, hospitality, and transportation sectors, could face higher operating costs, while households may experience an increase in living expenses, especially those relying on LPG for cooking.
For Ghana to navigate these changes successfully, policymakers must take proactive steps to mitigate the effects of rising LPG prices and ensure that businesses and citizens are not disproportionately affected.
The government’s intervention in stabilizing fuel prices could provide much-needed relief to the economy, allowing businesses to continue operating efficiently and citizens to maintain their standard of living. As global fuel market dynamics continue to evolve, Ghana must adopt policies that promote energy resilience and economic stability.
