BY MOHAMED M. SESAY (LUCKY)
Petroleum products have political and economic implications. Suffices it to state that it has the potential of stirring debates.
The Courier holds the belief that fuel (gas) prices play a pivotal role in the everyday life of citizens, particularly in Sierra Leone. The transportation effect of the price and trickle-down effect on goods and services is where the trouble can arise.
Nonetheless, the inevitable increment of fuel (gas) prices as of 1st March 2022 from Le 10,000 to L12, 000 per litter, still ranks Sierra Leone as the second country in West Africa with the cheapest pump price of fuel (gas) in West Africa after Nigeria. Nigeria tops the list as the country with the cheapest fuel price in West Africa simply because Nigeria is an oil endowed country. My background checks affirmed that Ghana has the highest pump price of fuel in the sub-region followed by Senegal. I am not actually serving as a defendant for the Petroleum Regulatory Agency, but basic research will confirm that even Ghana has the highest pump price in the region.
I cannot be hypocritical in fathoming the inimical effect the recent increment of fuel prize would hit the poor masses. Transportation fare has gone up which will equally inform the increment of food and other essential commodities to skyrocket as well. However, one cannot shy from the reality that Sierra Leone just after Nigeria, is the second country in West Africa with the cheapest fuel price.
It is obvious that whenever fuel prices spike particularly in Sierra Leone, we often intend to blame someone or the government for our hurting pain at the pump, without reflecting on the compelling forces that influence fuel prices. The reality is that the oil industry is a complex market. Though there are numerous factors that could ultimately influence the price of fuel, such as weather, government policies, and international relations, there are four cardinal factors that have the most significant influence. These factors include the cost of crude oil, refining costs and profits, distribution and marketing costs, and fuel taxes.
Alternative fuels, such as natural gas, propane, electricity, and biofuels, can mitigate some price fluctuations attributable to short-term events, like natural disasters because they diversify the fuel supply.
However, some alternative fuel prices are also dependent on similar factors. I must remind you that the reason Sierra Leone still enjoys a relatively cheap price of fuel is because of good government policies. One would want to ask magic Sierra Leone plays to be almost at par with an oil-producing country Nigeria as the second country in West Africa with the cheapest fuel price. We have seen over the years the government has given subventions to all oil marketing companies in the country in order to maintain and stabilize the fuel price despite the astronomical increment in the international market.
Diluting further into the recent hike of fuel price conundrum in Sierra Leone, keen attention should be paid to two major factors responsible for a potential increase in fuel prices. Those compelling forces are; the volatility in foreign exchange rates and the continued rise in international crude oil prices. Prior to the coronavirus pandemic, the LEONE has depreciated against the dollar as a result of dwindling foreign revenue and earnings. From a technical point of view, as long as Sierra Leone continues to import refined petroleum products, the country is definitely subject to the prevailing state of the exchange, irrespective of which government is in power.
As rightly stated by the Sierra Leone Petroleum Regulatory Agency, there is no perpetual fixed pump price for fuel globally. For Sierra Leone, the county reviews its pump’s price on a monthly basis driven by International factors as earlier stated above. Having a refined product at a prearranged price set at the global markets such as cost importation, shipping cost, and premium, are the dominant drivers for the increment of fuel price.
Equally so, geopolitical anomalies have also contributed to the recent hike in global fuel prices, especially with the ill happenings between Russia and Ukraine. The top three countries that sell natural gas to Europe by pipeline are Russia with 167 Billion cubic meters (BCM), Algeria with 21 BCM, and Azerbaijan with 14 BCM. Regarding pipeline supply, Russian gas accounts for 79% of such imports while Algeria accounts for 10%. Within the top five countries that export Liquefied Natural Gas (LNG) to Europe with methane tankers, I also realized that Russia and Algeria have 17.2 BCM and 13.9 BCM respectively. Other relevant countries within the total amount of LNG that reaches Europe are Qatar with 30.2 BCM and the USA with 25.6 BCM.
The antagonist of the government might not agree with me that in Sierra Leone, the pricing strategy on fuel is well structured, transparent, and reviewed monthly. It is explicitly clear that pump prices of fuel have changed approximately six times since the Bio-led Government came into governance. There has also been an unprecedented reduction in the pump price about three times under this current administration. The swing state regarding an increment of fuel price under the New Direction Government is not unconnected to the global shake-up for fuel price increment.
The Bio-led Government has managed to keep pump prices of fuel stagnant from Le 7,000 per liter for over six months despite all the international pressure demanding the government to remove subvention on pump prices. The government could not continue to massage the international pressure asking for an increment of fuel price which precipitated the previous increase from Le 8,000 –to Le 10,000 per liter. The government also maintained the Le 10,000 per liter from –August-July 2021 until this recent increment from Le 10,000 –to Le 12,000.
It is the gospel truth that petroleum products affect or impact every facet of the socio-economic cycle of the nation. It is also true that any increment in fuel price has pervasive ramifications on citizens including the very State Actors. But what we should accept is that government did not do this out of callousness. It is just unfortunate that all available means for the government to maintain the previous price were exhausted due to international pressure. It is equally worth noting that Sierra Leone neither has oil products nor a refinery factory for petroleum products. I will end with this edition with this assurance that, unlike the previous government, the Bio-led Government will effectively effectuate any decrease of fuel price at the international level to reflect in the country as it has always been the case.
THE COURIER
