The challenges of regulating petroleum products
The socio-economic issues linked to the regulation of petroleum product prices are:
- CONTROL OF INFLATION AND PRESERVATION OF THE PURCHASING POWER OF HOUSEHOLDS
Stabilising petroleum product prices results in better control of inflation, which is essential to preserve the purchasing power of households and reduce the cost of production inputs for companies. Indeed, the prices of goods and services are generally directly or indirectly influenced by trends in fuel prices.
Regarding the direct impact, hydrocarbons are used as an energy source for production purposes in various activity sectors (bakeries, construction, etc.), so any increase in their prices will automatically lead to an increase in the price of the final products.
As for the indirect impact, it stems from the fact that traders pass on the transport costs of their goods to the selling price. These transportation costs are linked to fuel prices. Therefore, any increase in fuel prices will ultimately lead to a rise in the prices of goods and services, with transportation costs acting as the transmission channel.
The downstream petroleum sector covers activities as diverse as crude oil refining, supply, and trading.
- MAINTAINING SOCIAL PEACE
Maintaining social peace is undoubtedly one of the major benefits of the policy of stabilising prices of petroleum products. The increase in fuel prices typically provokes social unrest caused by the rising cost of living following the hike in these product prices. In February 2008, Cameroon faced significant social unrests caused by a fuel price increase of CFAF 15 per litre, which led to a surge in the prices of essential goods. The return to calm required the intervention of law enforcement forces and negotiations with social partners, resulting in a reduction of CFAF 6 on diesel and kerosene. The government’s decision to freeze the consumption prices of petroleum products, which have been in effect since 1 January 2016, is still relevant.
- PROMOTING SOCIAL EQUITY
Through the standardisation of petroleum product prices exit petroleum depots as upheld by the HPSF, consumers, regardless of their depot location, purchase the products at the same price. This creates more equity among consumers. Furthermore, the standardisation of petroleum product prices reflects the Government’s desire to prevent price disparities between consumers in areas close to supply sources and those further from it, who would otherwise pay higher prices due to transportation costs.
- HOUSEHOLD ACCESS TO PETROLEUM PRODUCTS
The regular supply of petroleum products nationwide enables households to have access to these products to meet their domestic needs, such as cooking food using domestic gas cookers, travelling in their vehicles (motorcycles, cars, etc.), or using public transportation; lighting by fuel-powered generators in rural areas prone to power cuts.
- SMOOTH RUNNING OF ECONOMIC ACTIVITIES
The constant availability of petroleum products allows companies that rely on this energy source to operate effectively, thereby producing more for sustained economic growth. On the contrary, fuel shortages expose the economy to severe paralysis. During shortages, we could witness the suspension of land freight and urban and interurban transport services, resulting in disrupted supply to markets and, ultimately, slowing down economic activity.
- GENERATING REVENUE FOR THE STATE
The sale of petroleum products generate revenue for the State through the petroleum tax included in the price structure.
- IMPLEMENTATION OF LARGE INFRASTRUCTURAL PROJECTS
The implementation of major infrastructure projects (roads, hydroelectric dams, ports, stadiums, etc.) requires a sufficient supply of fuel to continuously supply the machinery and trucks deployed to construction sites.
- SUPPLYING ELECTRICITY TO PART OF THE COUNTRY
Electricity plants supplying the northern regions of the country currently operate primarily on diesel. The regular supply of diesel to these plants, facilitated by land transport authorised by the HPSF, ensures the continuous operation of these plants and guarantees electricity supply to the benefit of the populations in these regions.
- ENVIRONMENTAL PROTECTION
Efforts by the state to make domestic gas accessible to a greater number of households aim, among other things, to reduce phenomena such as deforestation and environmental degradation, which contribute to climate change. This is partly due to excessive use of wood and its derivatives by households as a source of energy for cooking.
- PROTECTION OF CONSUMERS THROUGH THE PROVISION OF QUALITY PRODUCTS
Measures taken against petroleum product fraud (chemical marking, crackdown operations, etc.) ensure that consumers receive high-quality products, whose usage will not harm their health or means of transportation.