The Chamber of Oil Marketing Companies (COMAC) has renewed its call for the removal of taxes on Liquefied Petroleum Gas (LPG). This appeal comes as households face projected increases in LPG prices during the second pricing window of July.
Consumers are preparing for higher costs across various fuels, with petrol, diesel, and LPG all expected to see price hikes. COMAC's latest pricing outlook indicates petrol could rise by 3.79% to 5.31%, while diesel is projected to increase by about 7 pesewas per litre to around GHS 16.00. LPG is expected to climb by 1.10% to 1.30% per kilogramme.
This situation highlights a broader challenge for Ghana's economic and environmental policies. The country aims to promote LPG as a clean cooking fuel to reduce deforestation and improve public health. However, current tax structures make LPG less affordable for many citizens, potentially undermining these critical goals.
COMAC Chairman Gabriel Kumi has previously stated that excessive LPG taxation across West Africa hinders clean energy objectives. He argues that governments have imposed multiple taxes on LPG, making the cleaner fuel unaffordable for many low-income households. This contradicts the initial intent of LPG to reduce tree-cutting for charcoal.
The immediate drivers for these price increases include renewed geopolitical tensions and a rebound in crude oil prices. Brent crude, for instance, climbed above US$84.00 per barrel following tensions around the Strait of Hormuz. Additionally, a slight weakening of the Ghana cedi, which depreciated by 0.55% against the US dollar from GHS 11.4333 to GHS 11.4970 for the July 16 pricing window, also contributes to higher import costs.
Ghana's petroleum product prices are determined by the import parity price, the exchange rate, and domestic taxes, levies, and margins. While global crude prices and foreign exchange movements are beyond direct government control, the tax and levy component is within policymakers' purview. This is where COMAC directs its advocacy.
The National Petroleum Authority (NPA) has also adjusted price floors upwards for the second pricing window of July. The petrol floor moved from GHS 12.79 to GHS 13.28 per litre, and diesel increased from GHS 13.54 to GHS 14.35 per litre. The LPG price floor also saw a 0.79% upward adjustment per kilogramme, reinforcing expectations of higher retail prices.
For Ghanaian households, particularly those with limited incomes, these price increases have direct and significant implications. LPG is not a luxury; it is a daily necessity for cooking, impacting household welfare and indoor air quality. When LPG becomes unaffordable, families often revert to cheaper, dirtier alternatives like charcoal and firewood.
This shift has severe environmental consequences, leading to increased deforestation and greater pressure on Ghana's already stressed forest resources. It also exacerbates health issues related to indoor air pollution. The policy of promoting clean cooking fails quietly when affordability becomes a barrier, pushing citizens away from sustainable energy solutions.
Decision-makers will need to weigh the fiscal benefits of LPG taxes against the broader economic, environmental, and public health costs. The debate over LPG taxation is crucial for Ghana's energy transition and its commitment to sustainable development goals. The government's response to COMAC's call will significantly influence household energy choices and environmental outcomes in the coming months.