Ghana projects to pump 190,000 barrels of crude per day by the end of 2016, taking TEN and Jubilee productions into consideration. Expected inflows from the sale is expected to be heavily impacted by the continues dwindling of the world market oil price as a result of the saturation of the oil market by the OPEC and other producing countries.
The situation has become critical worldwide, and Ghana is of no exception. The government is expected to shore up its inflows to support the 2016 budget going forward. Current Oil price has hit a 13-year record low according to available historical data. Ghana is estimated to be losing some US$ 250 million (approximately GH¢1 billion) in benchmark petroleum revenues after government had used US$53.02 as price per barrel as its benchmark price for this year.
The question that begs for answers are:
- Why is the local price of fuel at the pump not reflecting the changes in the world market price of oil?
- Is the current increase in the tax component of the buildup price of fuel, intended to shore up governments inflow in the face of the plummeting world market price of oil?
It is the expectation of every Ghanaian to see a drastic reduction in the price of fuel locally given the world market price of $28 per barrel as at January 18th 2016. In as much as the citizens complain, the government sees this occasion as a ‘cash heaven’ necessary to offset some of its outstanding obligations. The recent endorsement of the government’s structural reforms by the IMF provides a strong position for government going forward.
Will the government accept to reviewing the tax component on petroleum products given the impending Labour turmoil?
Meanwhile, Iran a member of OPEC has hinted to increasing oil production by some 500,000 barrels a day, after the revocation of its sanctions under a nuclear deal with world powers.
Also tensions between Saudi Arabia and Iran have heightened the risk of increased pricing competitiveness. The Wall Street Journal reported on January 3rd that Saudi Arabia had ended diplomatic relations with Iran deepening the political conflict between the two oil producing countries.
This is likely to bring down the price of oil further in the already saturated world market. Iran’s capacity preceding year 2012 was some 2.3 million barrels a day, constituting a large share of the market, which it intends to take over going forward.
If the world market price of oil continues to decline as projected, and the pressure from the labour front gathers more momentum, coupled with the agitation from the opposition political parties, the government may vary its options by submitting a proposal to parliament for a review of the tax component of the petroleum build up price to give Ghanaians some breathing space.