Domestic Refining in Ghana: Likely Effects on the Cedi and Inflation

Published: 2026-09-07 | Kanari Intelligence

Domestic refining would help at the margin, but it would not remove Ghana’s dollar oil exposure or mechanically deliver cheaper fuel under the current pricing regime.

Executive Summary

Domestic refining would not eliminate Ghana’s petroleum-related demand for foreign exchange because crude oil feedstock remains a US-dollar commodity. The realistic foreign-exchange gain is the refining value-added retained onshore — the crack spread plus some logistics and service margins — not the full refined-product import bill [8][7]. That distinction matters. Drawing on Ghana Statistical Service monthly trade data for mineral fuels and oils (HS27) from January 2021 to June 2025, Ghana imported an average of $365.3 million per month and exported an average of $343.2 million per month, leaving a modest average monthly deficit of about $22.1 million in that basket over the period. Imports were also more volatile than exports: monthly import volatility was roughly 33% of the mean, versus 29% for exports. In other words, the petroleum trade channel is material, but it is not large enough for domestic refining alone to transform the cedi’s trajectory.

The inflation story is similarly bounded. Under Ghana’s pricing system, pump prices are built on import parity and adjusted every two weeks, so domestic refining does not automatically translate into lower retail fuel prices unless the pricing formula is changed [3][2]. As of 16 March 2024, the ex-refinery component was GHS 9.98 per litre, or 73.4% of the petrol pump price; taxes and levies added GHS 1.90 per litre, or 14.0%; regulated margins added GHS 1.32 per litre, or 9.7%; and marketers/dealers received GHS 0.40 per litre, or 2.9% [3][2]. That means most of the pump price is indeed the tradable oil component, but a meaningful 26.6% is non-crude taxes, levies, and margins that domestic refining does not erase.

The execution constraint is decisive. Tema Oil Refinery’s operating history is one of low utilization, repeated shutdowns, feedstock shortages, and unresolved technical losses [4][3]. So the realistic policy comparison is not “imports versus a fully efficient refinery,” but “imports versus a refinery system that may capture only part of the refining margin and may do so unreliably.” Under that more realistic lens, domestic refining would modestly reduce Ghana’s net dollar demand and modestly soften fuel-driven inflation pressure, but it would not by itself stabilize the cedi or materially reset headline inflation.

Key findings:

• The pump-price arithmetic is dominated by the tradable oil component, but not by crude alone: on 16 March 2024, petrol’s ex-refinery component was GHS 9.98/litre (73.4%), while taxes and levies were GHS 1.90/litre (14.0%), regulated margins GHS 1.32/litre (9.7%), and marketers/dealers GHS 0.40/litre (2.9%) [3][2].
• Ghana’s mineral-fuels trade position was only modestly negative on average: from Jan 2021 to Jun 2025, monthly exports averaged $343.2 million and imports $365.3 million, implying an average monthly deficit of about $22.1 million [6].
• The gross import bill overstates the FX saving from domestic refining: the relevant ceiling is the refining margin, not the full refined-import bill, because crude feedstock is still priced in dollars [8][7].
• The benchmark refining margin is real but narrow relative to the gross bill: over Dec 1999 to May 2026, US Gulf Coast jet fuel averaged $81.66/bbl against Brent crude at $67.20/bbl — an average crack spread of +$14.46/bbl (median +$12.63/bbl), positive in 99.4% of months, and unusually wide (median +$24.39/bbl) since 2022 [13].
• Fuel-to-inflation pass-through exists, but it is not one-for-one: over May 2017 to Dec 2023, a sustained GHS 1.00/litre rise in ex-pump petrol prices is associated with about 293 basis points of headline inflation and about 464 basis points of transport inflation [3][6].
• The cedi remains the larger macro transmission channel: Ghana’s own empirical literature consistently finds exchange-rate pass-through to inflation is substantial but incomplete, with first-year estimates around 0.6 to 0.8 in several studies [1][10][11].
• Execution risk is not theoretical: TOR’s operational losses were reported at about 9% of the import value of crude processed in 2019, and recent official reporting still points to idle core units and feedstock constraints [4][3].

1. Theoretical Framework

The economics of domestic refining in an oil-producing fuel importer are straightforward. Refining onshore can reduce the imported component of the final fuel price only to the extent that it replaces foreign refining margins, some shipping and insurance costs, and some imported logistics services. It does not remove the need to pay world prices for crude oil in US dollars [8][7]. That is why the true foreign-exchange saving is the refining value-added — the crack spread — rather than the gross refined-product import bill.

This distinction also shapes the exchange-rate channel. If Ghana refines domestically, the country still either imports crude or forgoes exporting crude that could have earned dollars abroad. The cedi therefore benefits only from the net dollar demand avoided on the refining-and-logistics slice, not from the full value of petroleum products consumed locally [8]. In macro terms, that is a second-order improvement, not a regime shift.

The inflation channel is similarly partial. Ghana’s empirical literature shows that exchange-rate pass-through to prices is substantial but incomplete, and that oil-price shocks feed into inflation mainly through transport and other tradable-cost channels rather than through a permanent one-for-one effect on the entire CPI basket [1][9][10][11]. Domestic refining narrows the imported-fuel component only on the margin. It does not insulate Ghana from crude-price shocks, and it does not remove the exchange-rate sensitivity of the crude feedstock itself [8][7].

What this means: domestic refining can improve Ghana’s inflation and FX position, but only by capturing a slice of the petroleum value chain. The policy debate should therefore be framed around “how much of the refining margin can Ghana reliably retain?” rather than “can Ghana eliminate fuel-related dollar pressure?”