Gov’t could lose nearly GH¢500m a month for every GH¢1 cut from fuel taxes

 

Government has announced plans to suspend selected taxes, levies and margins on petroleum products in a bid to cushion consumers from rising fuel prices driven by tensions in global oil markets.

The decision follows recent increases in crude oil prices linked to the ongoing US–Israel–Iran conflict, which has triggered upward pressure on fuel costs worldwide.

Announcing the directive, the Minister for Government Communications said Cabinet has instructed the Ministers for Finance and Energy to take immediate steps to reduce fuel prices beginning from the next pricing window.

“Cabinet has directed the Finance and Energy Ministers to take immediate steps to reduce the price of fuel through the removal of some taxes and margins on fuel. The intervention will remain in force for an initial period of four weeks,” he stated.

What Could Be Affected

While the government is yet to specify which components will be suspended, current fuel pricing structures show that taxes and margins make up a significant portion of pump prices.

At present, taxes and margins account for about GH¢4.20 per litre. With petrol selling at roughly GH¢13.30 per litre and diesel at about GH¢17.10, this represents approximately 31% of petrol prices and 24% of diesel prices.

The largest single levy is the Energy Sector Shortfall and Debt Recovery Levy (ESLA), which stands at GH¢1.95 per litre following the addition of a GH¢1 increment.

Other major taxes—including the Energy Fund Levy, Road Fund Levy and Special Petroleum Tax—bring total tax components to around GH¢2.90 per litre, while margins contribute an estimated GH¢1.37.

Margins Under Scrutiny

Several petroleum sector margins are now under increasing scrutiny, particularly those linked to distribution and pricing equalisation.

One key charge is the Primary Distribution Margin, which covers the cost of transporting fuel between depots operated by the Bulk Oil Storage and Transportation Company (BOST). Consumers currently pay about 26 pesewas per litre for this service.

In addition, BOST receives roughly 12 pesewas per litre to support the maintenance of strategic fuel reserves. However, analysts note that the company has increasingly taken on commercial activities, competing with private importers.

The Unified Petroleum Pricing Fund (UPPF), originally introduced to ensure uniform fuel prices nationwide, has also seen significant increases. The margin has risen from 22 pesewas in 2018 to about 90 pesewas per litre—an increase of over 300 percent.

Research by the Africa Centre for Energy Policy (ACEP) indicates that the UPPF now funds a broader range of activities beyond transport equalisation, including fuel support for security agencies, government operations and programmes under sector institutions.

Fiscal Trade-Offs

Any decision to cut taxes or margins will come with financial implications for both the government and agencies within the petroleum value chain.

According to analysis, every GH¢1 reduction in fuel taxes could lead to a revenue shortfall of nearly GH¢500 million per month. A GH¢2 reduction could push that figure close to GH¢1 billion within a single month.

However, targeting margins instead of taxes may have a smaller direct impact on government revenue, since margins are distributed among sector institutions rather than paid into the central budget.

Because multiple agencies depend on these funds—including the National Petroleum Authority (NPA), BOST and the Petroleum Hub Development Corporation (PHDC)—extensive stakeholder consultations are expected before final decisions are announced.

“The involvement of several stakeholders means consultations are ongoing. A definite announcement will be made on the specific taxes and amounts to be affected when the next pricing window is reached,” the Minister explained.

Additional Measures and Public Concerns

As part of the broader cost-control measures, political appointees have also been directed to comply strictly with a ban on fuel allowances and allocations.

“The President has reminded ministers and senior officials to adhere to the directive on fuel allowances,” the Minister added.

Despite the planned relief, some consumers remain cautious. Past temporary interventions—such as those introduced during the COVID-19 period—were later converted into permanent taxes, raising concerns about the long-term implications of current measures.

Potential Oil Revenue Upside

Rising global oil prices may, however, provide some fiscal cushion.

While the 2026 budget projected an average oil price of about $76 per barrel, recent prices have hovered closer to $100 per barrel. This creates a potential windfall of around $24 per barrel.

The extent to which Ghana benefits from this increase will depend on the timing of crude oil liftings and whether recent shipments have been sold at the higher market rates.

For now, attention remains focused on the government’s next pricing window, where the full details of the fuel relief measures are expected to be announced.