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Monday, September 20, 2010

NO GAS: waiting for LP gas ...OR: A lesson in Economics

Charlie writes:

Last week, we ran out of cooking gas in our blue 15kg bottle, and switched over to our second one. I figured we could go by either of Dansoman's two fuel stations for a re-fill, but found it not so easy.

Earlier in the week, the station in the neighborhood of MUCG was dispensing gas to a long line of taxis, making the access to the campus more congested than usual. By the time I made it there, the 3-foot-square white painted plywood sign with red letters "SORRY NO GAS" was back in place, and the station was locked.

Later in the week, we saw a similar long line of taxicabs near Control Goil station. Since High Street is being worked on, all the traffic is rumbling over dirt roads parallel to it, and again the line of cabs was obstructing traffic. I stopped by on Friday with our tank, and the attendant just shook his head, then suggested that I come back at 6 a.m. when the line would be shorter. I
counted about 100 tanks waiting to be filled, and the attendant said it would be a four hour wait.

This morning, our driver was running late (another road closing) but advised that the queue was of a manageable length, so I could try again if I got there around 7 a.m. I loaded the tank in the back seat of the Carina, then parked outside the station. There was a line of about 20 tanks awaiting the pay station, where the attendant would eyeball your tank, then quote your
fee (I paid GHC 12.20, about USD 8 for the 14.5 kg of gas, sold at just over 80 pesewas per kilo).
She dispensed change and a two-inch square receipt with the quantity purchased and today's date.

Next, I carried the tank to the end of the line snaking back from the chain-link fenced cage. Here several operators (all male) wearing bright blue jumpsuits were handling the LP gas filling operation. Everyone was patiently waiting for their turn, and as tanks were brought into the cage, the whole line would advance a few feet. The men would move the womens' tanks, letting them sit on the bench provided. Everyone from a girl who looked about 10 years old, to market women, mothers with babies on their backs, and young men were attentive to their place in
the queue, and there was surprisingly little conversation going on.

When someone's tank was filled, the operators would heft it from the scale, and half roll, half swing the tank down to the entrance of the cage. The young men would often carry them off stiff-armed straight overhead, carrying them as a lifter might carry a barbell weight, in a
horizontal position, grasping the bottom ring and the top flange. Most women would place the tank atop their heads, using a small rolled cloth to cushion their skulls from the metal edge of the bottom ring. One woman begged the attendant to help her carry her tank, she holding one
end while he the other, until they got to the main road, where she could hail a cab. I noticed a handtruck near the gate, so used it to lug my filled tank back to the car, belting it into the back seat for the trip home. During the hour that I was at the station, I believe I was the only one to do that.

The whole experience reminded me of a summer in the 1970s, when I sat in our family car during the gasoline crisis in the USA. Today, the Goil folks were not accepting taxis at
their station, I presume they are nearing the end of their supply and would prefer to dispense gas for cooking than for driving. According to Dean Osborne Jackson, my local economic advisor, the main cause of the lines is that the price set by the government is sub-market. Therefore, taxi drivers have moved in great numbers towards LP fuel. This interested me, so I checked with Mr. CDK Opoku, an economics lecturer. This resulted in a long discussion about markets and African politics. If you pull up a chair, here's the rest of the story...

The Government of Ghana had worried that her forests were being cut down to make charcoal for cooking fires. To relieve pressure on the forests, Ghana, as well as some other African
countries, promotes the use of LP Gas for cooking. In order to make the cost attractive, the Government, which is the only entity allowed to import petroleum products, enters into agreements for the supply of crude oil from Nigeria and other oil states. Then the Tema Oil Refinery produces petrol and LPG from the crude. The government subsidizes the cost of the LPG. CDK believes the market price for my tank would be about GHC 20, rather than the
GHC 12.20 that is charged.

During the last administration, the Government of Ghana entered into a 90 day credit facility with Nigeria for crude oil. Nigeria required that their oil be carried on Nigerian vessels to use the facility, and the current government of Ghana claims that there were payoffs being made to certain unnamed parties on this carriage, and withdrew from the deal. Now, LPG must be bought on the spot market for cash, rather than refined from crude here on credit. So, there
is a reduced supply, since the Government does not have sufficient funds to purchase and subsidize the quantities demanded. Ironically, since the prices are subsidized, the taxi operators have found that it is cheaper for them to run taxis on LPG than petrol. In yet another example of unintended consequences to government programs, the LPG demand has grown dramatically.
And there are taxi drivers who are already dropping LPG tanks off to be filled while they wait at other stations to fill their tanks. It is likely that they use the other tanks to unsafely fill their taxi tanks. So clearly, it would be impossible to set a different price for domestic and automotive use of LPG.

Who'd have thought I'd learn so much economics from a simple transaction so Mary Kay can cook dinner?

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