Fuel price cuts won't translate instantly - ACEP boss explains why

Ben Boakye, Executive Director of the Africa Centre for Energy Policy (ACEP), cautioned on Thursday on Joy News that recent interventions to stabilise fuel prices will not immediately translate into relief for consumers. Speaking on PM Express Business Edition on the sidelines of the IMF Spring Meetings in Washington DC, Mr. Boakye said the impact of falling fuel prices takes time to filter through the economy. He warned that price adjustments operate at multiple levels, making immediate relief unlikely, stating, "It will always happen at two levels, on the international market price and also the past three effects, even when prices come down from $100 per barrel to say $50 or $60, you're not going to have goods and services reduced or the impact reversed almost immediately."

Mr. Boakye explained that businesses often delay passing on cost reductions to consumers because "people always want to make a margin" and "want to watch this space to see whether they can even keep the same prices." He said that this behaviour slows down the transmission of lower fuel prices into the broader economy, noting that "the pass-through effect is always slow, so that pass-through effect on the average consumer will drag for a longer period of time." His comments come as government moves to cushion consumers from rising petroleum prices triggered by global shocks linked to tensions in the Middle East.

Mr. Boakye noted that there is still hope for gradual improvement if global conditions stabilise. He said, "But we're hoping that the market situation will normalise. Would, you know, stabilise as soon as possible, and that create a signal for us to look at the pass-through effect and see how we can reverse some of those impacts in the medium term."