GH¢1 Fuel Levy: A Hidden Threat To Fuel Price Relief?

 

The cost of fuel remains a critical issue in Ghana with ripple effects across the economy. Fluctuations in pump prices directly impact transportation costs with calls for fare hikes typically following fuel price increases and at the same time, pressure mounting on transport operators to reduce fares when prices drop.

In 2024, fuel prices hovered around GHȼ15 per litre. However, recent trends have seen prices fall to between GHȼ11 and GHȼ14 at the retail outlets of oil marketing companies.

Drivers Of The Decline In Pump Prices

Since January 2025, the pump prices of petrol, diesel, and LPG have been on a downward trajectory. This has been largely attributed to two key factors which are the appreciation of the cedi and declining international crude oil prices.

Oil Marketing Companies (OMCs) and Bulk Import Distribution and Export Companies (BIDECs) credit the recent stability of the cedi as the major contributor to the drop in prices.

According to the Chamber of Bulk Oil Distributors (CBOD), for the first time since October 2022, prices fell below GHȼ11 per litre, a significant reversal from the highs of GHȼ18 to GHȼ23 seen in late 2022 when the cedi sharply depreciated against the dollar.

By mid-July 2025, the cedi had appreciated by roughly 30% from GHȼ14.85/USD at the end of December 2024 to GHȼ10.30/USD. This appreciation has been supported by fiscal tightening, improved gold reserves, sound economic management, and broader global factors.

Global crude oil prices also fell by 10% in Q2 2025 compared to Q1 and 16% year-on-year providing further relief at the pumps.

As a result, pump prices for petrol, diesel, and LPG have declined year-to-date by 29.21%, 15.53%, and 18.72%, respectively.

However, the declining trend in crude oil prices was interrupted due to the Israel–Iran conflict, which spiked the prices amid threats to close the Strait of Hormuz.

This prompted government to suspend the implementation of the Energy Sector Shortfall and Debt Repayment Levy. With a ceasefire now in place, global prices are showing signs of decline again.

The Introduction Of A New Fuel Levy

The amendment of the Energy Sector Shortfall and Debt Repayment Levy is to raise additional revenue to serve as a dedicated fund for the power sector, particularly to purchase liquid fuels for the use of thermal power generation plants.

Additionally, revenue from the levy will also be used to clear mounting energy sector debts.

Government projections indicate that the levy will generate approximately GHȼ5.7 billion annually. Despite this expected inflow, the Ministry of Energy and Green Transition acknowledges that the revenue will not fully cover the projected cost of procuring liquid fuels in 2025, which is estimated at US$1.2 billion – equivalent to GHȼ12.6 billion based on the Bank of Ghana’s average exchange rate of US$1 – GHȼ 10.5.

To bridge the gap, the Ministry of Finance will continue to provide additional financial support for fuel procurement to maintain uninterrupted electricity supply.

In response to concerns about the duration of the levy, the government has indicated that there is no sunset clause. Rather, a roadmap has been adopted to address systemic energy sector challenges.

This includes efforts to clear legacy debt, manage rising natural gas costs, and improve procurement and technical efficiencies within the power transmission and distribution value chain. A review framework has also been established to monitor the effectiveness and progress of the policy.

To ensure transparency and accountability, the government has committed to ring fencing the proceeds for their intended purpose, with periodic audits and published reports expected to track usage of the funds.

On July 16, 2025, the Ghana Revenue Authority (GRA) directed OMCs to implement a GHȼ1 per litre Energy Sector Shortfall and Debt Repayment Levy on refined petroleum products.

Fuel prices at some major outlets surged within the levy’s rollout. Goil, for instance, now sells a litre of petrol at GHȼ12.88, up from GHȼ12.07, while diesel has jumped from GHȼ13.20 to GHȼ14.38. Market leader Star Oil has also adjusted its prices, with petrol now going for GHȼ12.59 per litre though some outlets offer it at GHȼ11.99. Diesel prices at Star Oil have similarly risen to GHȼ13.99, with a few stations pegging it slightly lower at GHȼ13.79.

The Ghana Private Road Transport Union (GPRTU), which in May directed a 15% reduction in transport fares following sustained declines in fuel prices and the cedi’s appreciation, says it is monitoring the situation closely.

The group has indicated that should prices continue to rise, it will not hesitate to re-engage in negotiations for fare adjustments.

This early reaction to the new levy not only reflects immediate market responses but also highlights a growing risk: the erosion of recent price gains at the pumps that had offered modest relief to consumers and businesses alike.

The Chamber of Oil Marketing Companies (COMAC) indicates that without the new levy, pump prices would have fallen by 2%–3% in the second July pricing window.

The CBOD reports that the following taxes and levies are now applied to petroleum products:

  • ⁠ ⁠Energy Sector Shortfall and Debt Repayment Levy
  • ⁠ ⁠Road Fund Levy
  • ⁠ ⁠Energy Fund Levy
  • ⁠ ⁠Primary Distribution Margin
  • ⁠ ⁠BOST Margin
  • ⁠ ⁠Fuel Marking Margin
  • ⁠ ⁠Special Petroleum Tax
  • ⁠ ⁠Unified Petroleum Price Fund (UPPF)
  • ⁠ ⁠Distribution/Promotion Margin

Collectively, these accounted for 28.36%, 24.92%, and 15.23% of the ex-pump prices of petrol, diesel, and LPG, respectively, during the first pricing window of July.

Energy think tanks including the Chamber of Petroleum Consumers (COPEC), have since called for a review of the fuel tax regime. COPEC estimates the total tax burden on retail petrol and diesel is currently around 26.55%, and projected that the new levy alone pushed prices up by 6%–9% in the second pricing window of July – a projection which materialized.

Policy Versus Public Burden

Over the past decade, governments have routinely introduced or restructured fuel taxes to address fiscal gaps and energy sector debts. The latest levy continues this trend. However, as the tax burden grows, so do concerns over the sustainability of this approach.

To be sure, the need for revenue generation is clear. Finance Minister Dr. Cassiel Ato Forson, in the 2025 Mid-Year Budget Review, noted that the energy sector faces legacy debts and financing shortfalls of over US$1.5 billion annually.

The amendment to the Energy Sector Levies Act, which introduced the GHȼ1 levy, is expected to generate an additional GHȼ2.9 billion, increasing total revenue projections from GHȼ227.1 billion to GHȼ229.9 billion.

Indeed, the Finance Minister’s assertion that the challenges in the energy sector are quite enormous, emanating from debt, shortfalls, insufficient gas supply and inefficiencies is a reflection of the realities that the sector is bedeviled with.

The total energy sector debt as at the end of March, 2025 the minister said stands at $3.1 billion. The debt includes money owed to independent power producers, State Owned Enterprises and fuel suppliers.

Notwithstanding the challenges in the energy sector, it is critical to acknowledge that consumers also deserve targeted relief especially in a context where rising taxes have not corresponded with tangible improvements in the energy sector’s financial health.

The argument that fuel prices are relatively lower this year than last cannot be used as justification for imposing an additional levy. Such comparisons ignore the cumulative tax burden and high fuel prices consumers have endured over the years alongside general inflationary pressures that have eroded household purchasing power.

This is not the first time a levy has been introduced under the pretext of clearing energy sector legacy debts. From the Energy Sector Levies Act in 2015 to subsequent restructuring initiatives, Ghanaians have repeatedly been asked to pay more at the pump.

Yet, these levies have not succeeded in reversing the sector’s financial decline. Instead, the debt stock has continued to balloon, raising serious concerns about the potency of these measures and the absence of accountability mechanisms tied to revenue use.

This persistent lack of transparency is precisely why groups such as the Chamber of Petroleum Consumers (COPEC) and the Ghana Private Road Transport Union (GPRTU) are demanding clearer implementation timelines and measurable outcomes for the new levy.

A Call For Rethinking The Approach

While using petroleum taxes to shore up public finances is not inherently flawed, over-reliance on such levies risks undermining productivity and consumer confidence in energy reforms.

As the first pricing window in August approaches, attention will turn to whether the GHȼ1 levy will trigger a second consecutive hike in fuel prices potentially eroding recent consumer relief.

For energy sector reform to be sustainable, Ghana must shift towards diversified financing mechanisms, efficient sector governance, and a balanced tax policy.

Source Daniel Sackitey

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