SHORTAGE OF LIQUEFIED PETROLEUM GAS-MATTERS ARISING

The shortage of Liquefied Petroleum Gas for several weeks has provoked several reactions. The shortage has been linked to corruption and lack of expertise on the part of those appointed to manage the downstream oil sector, blamed on greedy taxi and LPG using vehicles, rising domestic demands amongst others. Several solutions have equally come forth: from outright banning the use of LPG in vehicles, removing government subsidies on the product so as to erase the price advantage commercial users feed on, padding taxes that create an extra income stream for the road fund etc. Most of the commentary creates the unfortunate impression as if LPG shortages are only occurring in 2010 or there has been a sudden surge for the product. The suggested solutions are also very puerile, and reflect the national tragedy of blaming everyone but ourselves to enduring problems. We also believe in quick fixes, not meticulous solutions. Until the PNDC government in the 1990s decided to aggressively package Liquefied Petroleum Gas as a better domestic cooking alternative to traditional ones, the product was being flared at the Tema Oil Refinery or used to fire the plant, as the engineers say. I bet that was a colossal loss! LPG supply, just like other petroleum products, then, was the sole preserve of Tema Oil Refinery and price of the product was compelling enough to encourage the switch from charcoal or firewood. To date, the price of LPG has remained fairly consistent with the object of its introduction and at present uses gasoline proceeds to cross subsidize LPG. Demand for LPG has consistently grown from the 1990s and a growth pattern is easily detectable for planning purposes. For instance, 53,806,000kg of LPG was consumed in 2004, 66,594,000kg in 2005, 76,383,318kg in 2006, and 111,632,688kg in 2007. About 50% of these annual volumes were imported to supplement local production. LPG thus represents the highest growing petroleum product stream since 2003, followed by Aviation Turbine Kerosene and Marine Gas Oil in that order. This phenomenal growth pattern is an understatement of the true consumption potential of LPG in Ghana, given the sporadic year in-year-out shortages. Indeed, distribution of LPG at TOR prior to 2005 amongst OMCs was always a fight amongst the Oil Marketing Companies because the distribution formula was fiercely contested. The product has never saturated the Ghanaian market for a period exceeding three (3) months -the ideal period for determining true OMC lifting potential and therefore market share is when the product saturates the market for a period exceeding six (6) months. This demand could easily be traced to a number of factors. The acute advantage of the benefits of LP gas in domestic cooking vis a vis charcoal or firewood is known to almost every Ghanaian household. With increasing industrialization comes

increased demand for energy (LPG inclusive). Many commercial and private vehicles have, for a fact, converted petrol engines to use LPG. So amongst all the interest groups that rely on LPG for one reason or another, can we simply reduce the current severe shortage to motorists? When President Mills led a high powered Ghanaian delegation to Copenhagen for the Climate Change Conference, I believe Ghana wanted to be taken serious on the grave issue of going green. It is a fact that carbon dioxide, produced when coal, oil, LPG, and natural gas are burned to produce energy used for transportation, manufacturing, heating, cooling, electricity generation, is in the centre of all discussions on climate change. It is also a fact that apart from fossil fuel powered power plants, vehicles account for the second biggest CO2 emissions globally. I dare say that with declining manufacturing activity, Ghana can only be relevant in the topic of addressing climate change by doing just two things; curbing deforestation and managing vehicular contributions. Globally, several initiatives are being pursued by countries, and vehicle manufacturers, from the fuel point of view, to control emissions from vehicles. Consumers have been encouraged for instance to switch to electric powered cars, hydrogen gas powered vehicles, natural gas powered vehicles and LPG powered vehicles. According to the World Liquefied Petroleum Gas Association (WLPGA), more than 9 million vehicles in 38 countries currently operate on LP gas. It's not a new idea: Propane-powered vehicles have been around for decades. The benefits include reduced emissions "50% less carbon monoxide, 40% less hydrocarbons, 35% less nitrogen oxides (NOx) and 50% less ozone forming potential compared to gasoline. With government incentives and tax breaks figured in, LP gas used in cars (known as autogas) can be much cheaper than gasoline. Even without the incentives, it is usually much cheaper. Autogas is a high-octane fuel, offering performance comparable to gasoline and diesel, and many owners claim that autogas runs more smoothly, resulting in less wear and tear on engine components." Countries like Japan, the Republic of South Korea, Netherlands, Thailand, Austria are encouraging the use of LPG for commercial transport. So why is the taxi driver in Ghana being portrayed as a greedy bastard because he/she is enjoying some subsidy. To the best of my knowledge, government subsidies are granted a person or group of persons in an enterprise thought to be in the public interest. And subsidies are normally meant for the poor and vulnerable. It is my considered opinion that both taxi drivers and owners are poor and vulnerable. If anyone buys a car, gives it to another person for a daily revenue of GH 15 or less, such an individual cannot qualify for a rich person. My personal dealings with taxi drivers or use of same leave me in no doubt that the subsidy is passed on to customers. Taxis using LP gas charge less per kilometer than their colleagues using gasoline or diesel! This can be verified very easily.

What about the numerous industries that use LPG in their production processes? For those who crucify use of LPG in cars, how would they react to LPG use in the textile, pasta, biscuit, confectionary, mining, construction, and tyre industries? Or do we look at these industries as huge kitchens cooking garden egg stews for the civil sector in Ghana. Again, if we can blow over 90 million dollars of cups, mugs, cars and a phony celebration benefitting only the rich, can we justify a call to ban use of LGP in vehicles? Is it too much for a taxi driver to enjoy these subsidies and pass them on to the over 15 million Ghanaians without a means of transport? And before we think of padding additional taxes to scare drivers from using LPG, wont it be reasonable for proponents of the concept to explain to Ghanaians why a traveler from Accra to Ho pays road tolls three (3) times whiles his counterpart on the AccraKumasi road pays tolls ONLY once. So, if the road needs an additional income stream, where do we start from raising taxes on LPG? From 2001, when the government deregulated the oil and gas industry, private companies were awarded bulk distributorship licenses to import refined petroleum products and supplement local production. This was done to eliminate delays associated with tendering for the importation of these products. The list of bulk distributors grow with each passing year and the requirements for gaining such important licenses are retrogressively mediocre. Why should a country grant bulk distributorship licenses without insisting on beneficiaries first developing petroleum storage capabilities? For a country with the fastest growing petroleum product being LPG, why should none of the many bulk distributors have LPG storage capabilities? All depend of TOR for storage of imported LPG and thus have to queue. Is there some economics to this arrangement that we do not know? With a finite LPG storage space at Tema Oil Refinery being exploited by all the players, a consumption pattern that is difficult to track by the authorities, and the lack of money (or is it vision) to expand existing infrastructure, the commercial driver using LPG is just a convenient punch-bag for our ineptitude.

By S. Kwame Manchie kmanchie@gmail.com