Adnan Adams Mohammed
Consumers of fuel product are advised to fill or buy any quantity of fuel they can safely store as prices are to surge further, according energy analyst.
The analyst asserted that, Bulk Oil Distribution Companies (BDCs) are now supplying petroleum products to the various Oil Marketing Companies (OMCs), operators of fuel stations, at the exchange rates higher than the current market exchange rate of the U.S dollar.
According to information gathered from the BDCs, they have recorded losses since early September when they sold the products to OMCs at the then prevailing exchange rate of averagely GHC9.0 to US$1.0 in the price build up.
Now, in November, they need to change those Cedis they received using the 8, 9, 10 Cedis exchange rate in the price build up in September into dollars at current price of GHC14. “You’ve locked in these products at a certain rate, and after you’ve sold the product and you’re going to buy forex, it has started going a certain trajectory,” he said.
“Many BDCs are in this dilemma except maybe Allied BDC which is well managed and has his own OMC. So they are now selling a liter of fuel at GHC18-19, as at last week Thursday, October 3, to recoup some of the losses they made”, Alex K. Mould, former CEO of National Petroleum Authority told Economy Times in an interview last week.
“Like I said most of the BDC‘s have made losses in September and October because of the 120 day credit given to them by their suppliers (the likes of Trafi, Glencore, Vitol and BP).
“They sold the products early September and are still holding the Cedis they got using GHC8, 9, 10 exchange rate used in the price build up at that time. Now they need to change those Cedis they received using 8, 9, 10 Cedis exchange rate in the price build up into dollars at current price of GHC14 to 15.
“So they have made losses (using the mark-to-market rate) although still, unrealized, because they haven’t changed the Cedi into dollars.
The situation has been confirmed by the Chief Executive Officer of the Ghana Chamber of Bulk Oil Distributors, Dr. Patrick Kwaku Ofori in a speparate interview last week.
He indicated that, Bulk Oil Distributors are currently bleeding due to the harsh economic conditions they have to operate in.
“You’ve locked in these products at a certain rate, by the time after you’ve sold the product and you’re going to buy forex, it has started going a certain trajectory,” he said.
Dr Ofori noted that, the prevailing economic situation has led to some distributors taking a break from the business to wait out the storm in order not to accrue any more losses.
Those who continue to trade, he said, are really having a terrible time and are most likely being driven to continue trading in order to make up for the huge losses they have accrued in earlier trades.
He noted that the rapid depreciating of the cedi against the dollar has cost many distributors millions of dollars in losses; this he says has been exacerbated by the fluctuating price of fuel on the international market, currently on a steady rise.
“So that notwithstanding, about the volumes of products that you’ve brought in-country that I was talking about and then also maturing LCs that you quickly need to cash in on. So most of the members in order to keep their credit lines open and then also to keep their banks happy needed to even give super abnormal discount on products knowing clearly that they were even going to make some losses”, he said.
“One of our major players has a dollar obligations of a minimum 23 million dollars a week, whilst the Bank of Ghana gives us 120million dollars a month. And I’m talking about just one player. So you look at the challenges that they go through.”
