The Chamber of Petroleum Consumers, Ghana (COPEC), has raised concern over this week’s price increment on petroleum products, accusing the government of sleeping on the job, when it comes to the management of the cost of fuel.
COPEC boss, Duncan Amoah in an interview with The Herald yesterday demanded “the government must reduce the overburdening taxes further, whiles exploring the option of hedging also, to at least ensure these price escalations are curtailed”.
The second pricing window of the month of May, begun yesterday with some of the major oil marketing companies increasing fuel prices across pumps in the country.
The first window of May, saw most oil marketing companies maintain prices from the previous window, averaging at GH¢4.540 for diesel and Gh¢4.550/litre for petrol.
According to COPEC, the signs of these increases have been on the wall for over two months now, and the government should have been up to the task to mitigate the impact on consumers.
Meanwhile, transport fares are likely to see a review in the coming days, following from the increments.
Ben Boakye, Executive Director of the Africa Centre for Energy Policy (ACEP), has also suggested that the government resorts to the stabilization fund to cater for the losses in revenue with the implementation of the hedging policies being offered.
Mr. Boakye lamented that for three years, government has been collecting levies into the stabilization fund for this purpose, adding it’s time the monies are used to cushion consumers while further reduction in taxes on petroleum are also pursued to protect businesses.
The new increases has seen some of the major oil marketing companies pump prices moving up by about 10p/litre for both products or some 2.2percent upward adjustments.
With these new increases, petrol is now selling at around 4.660/litre, whiles diesel is selling at 4.650/litre.
World market prices, has seen some significant increases over the past two months with gasoline recording about 10percent jump since the first week in March 2017, to close trading at $712.68/metric from $621.20/metric.
The Cedi, has over the past two period also seen some marginal loses of about 1.3 percent from 4.57 to close trading at 4.61.
Prices are set to continue rising on the international market and one expects Ghanaian authorities to be mindful of the dire impacts these price escalation have on ordinary pockets as drivers continue to complain of extreme pressures these increases are having on their pockets.
Ahead of the latest increment, the Chamber of Bulk Oil Distributors (CBOD) suggested to the government to introduce new mechanisms to protect the country from the gradual rise in crude oil prices.
The Chamber impressed on the government to among others initiate processes that will stabilize oil revenue arguing that this is necessary as Ghana is a net exporter of oil; that means the country imports more than it exports.
The CEO of the Chamber of Bulk Oil Distributors, Senyo Hosi, believes heeding their suggestions should cushion consumers greatly.
“So we can hedge against cash settlement where the government rakes in a hedge income…the government will therefore reduce the taxes to correspond to the losses in income from crude oil exports,” he stated.
Crude oil prices have been rising gradually on the international market for some weeks now.
A barrel of the commodity is being sold at seventy-seven dollars.
This is expected to increase cost to importing countries like Ghana.
“In addition, the government could implement the crude price threshold which is the politically sensitive price that the government thinks it has. Assuming the CPT is pegged at 75 dollars a barrel, the government reduces the taxes to compensate the loss of tax revenue when the price goes above 75 dollars mark,” Mr. Hosi added.
But Energy analyst, Dan Yergin, has projected that oil prices may continue to rally past three and half year highs and all the way to $85 a barrel as soon as July.
Prices in the oil market, have been steadily rising since last year, fueled by strong demand and output caps imposed by major producers aimed at draining a global crude glut. More recently, oil futures have rallied faster than expected as geopolitical tensions rattle the market.
Brent crude, the international benchmark for oil prices, rose toward $80 a barrel on Tuesday after hitting its highest level since November 2014.
The Pulitzer Prize-winning author, Yergin, said the cost could continue to climb due to the combined impact of falling output in crisis-stricken Venezuela, renewed U.S. sanctions on Iranian crude exports, and wars in Yemen and Syria that involve major oil-producing nations.
“We could see oil prices in July when demand is high … several dollars higher than it is. We could see it as high as $85 at least for a short period of time,” Yergin, vice chairman of IHS Markit, told CNBC’s “Squawk Box” on Wednesday.
Yergin’s remarks, add an influential voice to a chorus of analysts warning about prices spikes. Goldman Sachs last week, said Brent crude could spike above its $82.50 summer forecast, while Bank of America, Merrill Lynch, warned Brent could hit $100 a barrel by next year.
Yergin, said he was particularly concerned about Venezuela, where the fundamentals of the oil market and geopolitics are both at play.
Venezuelan output, has fallen from almost 2.5 million barrels a day, a couple of years ago to roughly 1.4 million barrels a day today, and could drop to 800,000 barrels a day by next year, he said.
“The screws are really tightening on Venezuela,” said Yergin, who notes that ConocoPhillips is seeking to seize assets owned by state oil giant PDVSA and warns Sunday’s presidential election threatens to draw fresh U.S. sanctions.
To be sure, the higher prices are a “big stimulus” for U.S. drillers, who could start pumping more, and Saudi Arabia can tap its spare capacity to meet demand, said Yergin.
However, drillers in western Texas, are facing bottlenecks and it’s not yet clear whether the Saudis are willing to wind down their deal to limit production with their fellow OPEC members, Russia and other producers.
On Tuesday, Again Capital founder, John Kilduff, told CNBC he believes the Saudis could let United States crude prices, currently about $71 a barrel, run up to $80-$85 a barrel.