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That Petroleum Regulatory Agency ‘Popular Insult’

February 22, 2016 By C.A.C. Jengo Snr

At first it was like – give them the benefit of the doubt. It will pass.

I am talking about the recent Petroleum Regulatory Agency press release, titled: Retail Pump Prices of Petroleum Products in Sierra Leone are Currently the Lowest in the Mano River Union. You tune in to radio stations, it’s the press release that you’ll hear being read – over and over again. Like we don’t understand enough. You read the papers and you’re bombarded by almost every one of them with the news: Retail Pump Prices of Petroleum Products in Sierra Leone are Currently the Lowest….

Since social media is now the most effective ‘kongosa box’ in modern history and since it is where I spend my social free time, I have become extremely frustrated with this repeated posting of this same press release many times over in every one of my many social groups on WhatsApp and Viber.

So if the retail pump price is higher in Guinea and Liberia than in Sierra Leone, does it have to assume the kingpin argument to justify maintaining the current unacceptably high price we continue to pay relative to the further falls in crude price?

Now – with the international stock market currently negatively impacting iron ore, bauxite and the other mineral taxable incomes, we have long accepted our government’s explanation that the growing budget deficit, is not entirely within their control. That is it as a result of falling international minerals prices. And iron ore production constitutes over half of our country’s GDP which tells of the magnitude of the international price fall on Sierra Leone.  We therefore accepted Minister Kaifala Marah’s projection that domestic revenue for 2016 is set at Le2.56 trillion against projected total expenditure of between Le3.94 trillion and Le.4.64 trillion. Even against this backdrop, being a donor-driven economy, Le798.1 billion in grants is projected for injection into the economy.

When in 2011/2012 oil price was hovering between US$120 and US$130 dollars a barrel, this government is on record for agreeing with oil companies to raise pump price and, if I remembered well, we began paying Le22,500 a  gallon (or Le4,500 a  liter), up from Le17,500 thereabout. On that too we agreed. After all, we were all listening to the same international news. We were all affected by the same international markets. By mid-2014, the impact of the US entering into the crude export trade began to be felt, helped by the introduction of a much cheaper technology called fracking to extract it. According to Reuters Business, oil has collapsed from levels above $100 a barrel seen in mid-2014 to just over US$30 today. When the Organization of the Petroleum Exporting Countries later that year in 2014 decided not to go ahead to cut supplies and boost price, oil prices began a more significant, dramatic fall.

Saudi Arabia, the biggest and most significant player, rejected calls to cut oil production levels which was later understood to mean a deliberate move to bankrupt new oil players/entrants, especially in the US as the Saudis blame them for causing the over-supply in the trade. When oil price reached US$53, after another rapid fall, this government, our government, in recognition of the same world market trend dropped pump price by 22%. The impact of this pump price drop on the Sierra Leone economy, according to Smart Polls, is estimated at over Le280 billion in yearly savings for big as well as medium to small scale businesses who otherwise would be spending higher outlays of their budgets on transportation and for running heavy machinery, as in the case of mobile and manufacturing companies.

Hear the PRA:

The PRA also wishes to reiterate that the current fuel pump price of Le 3,750 per liter in Sierra Leone continues to be the lowest in the Mano River Union, i.e. compared to the pump prices in Guinea and Liberia and, irrespective of the reported recent reductions in pump prices in those countries

The petroleum agency’s attempt to run a parallel comparism between our economic policies and those of Guinea and Liberia, is at best too simplistic and so too far off the point. Point number 1: Liberia and Guinea’s fiscal and monetary policies are informed by their own unique domestic vicissitudes and by the political demands of the day. Point number 2: accepted that their pump prices are higher, but it must be juxtaposed against the fact that food prices in those two countries are some of the highest in the region because of transportation costs. So, their negative in food production is a positive for us.  It is a vindication of our own choice of fiscal policy.

The PRA again:

”The PRA wishes to bring to the attention of the public that the percentage fall in the international market price of crude oil does not translate into a commensurate percentage reduction in the local pump prices of petroleum products, in Sierra Leone or in any other country. The reason being that, the other costs/charges which make up the pump prices need to have the same percentage reductions as the crude oil, to warrant its translation to pump-prices reductions to the same extent. This notwithstanding, the matter is still receiving the full attention of government and its technical partners.” 

The PRA’s argument above is self-defeatist. Wasn’t the PRA responding to oil price drops in the international market in the last six months of 2013 to reduce retail price by 22% in January 2014, even though most people considered it small but reasonable? Wasn’t this government following in the heels of many other African countries including Guinea and Liberia to reduce pump price? Why the hell this time round when at slightly below US$30 a barrel, the same PRA believes it ‘does not translate into a commensurate percentage reduction in the local pump prices of petroleum products’. Could this be a desperate attempt to create a rationale for maintaining the status quo in the interest of oil barons?

This writer calls on the PRA to review its explanation and do the right thing – engage the petroleum industry in Sierra Leone and in the sub-region under the umbrella of the government of Sierra Leone to bring to fruition further drops in the retail prices for fuel. In the United Kingdom, we read that their own version of consumer protection agency is investigating whether the oil industry is giving UK citizens a fair deal.  I expect the same here. I expect a robust consumer investigation into why the PRA should go out of its way to present a loop-sided argument seemingly in protection of the oil industry over and above the protection of our macro-economic interest.

If it is about maintaining the status quo, the press release’s presentation is woefully not helpful in that direction. One would have accepted the explanation that, prices of oil are expected to rise as top oil producing countries like Saudi Arabia, Russia and Iran consider capping production – which they have just done in recent days and which has seen oil price rally. It would have made considerable sense rather than what we have now.

Can the PRA please pull down this press statement and re-do their explanation. Sierra Leone is sovereign, independent nation with its own fiscal policy and national currency.

In part 2 of this commentary, the writer will look at the oil subsidy issue and question its validity when for all we know, we pay tax on every liter of fuel we buy and which is paid, or ostensibly paid, into the Roads Maintenance Fund of which we learn Le85 billion was spent to finance new projects in 2015. I will be asking whether the PRA is serving the interests of Sierra Leoneans or whether it has been ‘absorbed’ by the system that is bent on running against the people.

greatcac2012@gmail.com

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