Institute of Energy Securities predicts drop in Ghana’s oil revenue following 30% drop in oil prices globally

The Institute of Energy Securities (IES) has predicted a significant drop in oil revenue if the oil price continues to remain low.

Institute of Energy Securities predicts drop in Ghana’s oil revenue following 30% drop in oil prices globally

At the same time, it has anticipated that fuel prices at the pump will remain the same or drop marginally.

The Executive Director of IES, Paa Kwasi Anamua Sakyi, said this in an interview with Accra based Citi FM.

Although the government of Ghana in the 2020 Budget Statement projected $8.9 billion from oil revenue, Mr Sakyi says the coronavirus which has hit hard the Chinese and global economy will impact negatively on oil prices and revenue.

“We’ve been very much understanding what the coronavirus has done to us; there have been travelling restrictions, a lot of flights have been cancelled, a lot of shops and production outlets in China, and around China have been closed. There has been less demand for oil, that is why we’ve seen a drop in oil price in the past 3 months,” he said.

Adding that “From the beginning of the year crude oil price was $65 per barrel. By the close of trading last week, it was hovering around $45, that means there has been more than 35% fall in the price,” Mr Anamua Sakyi said.

The Director further said “If we used today’s price of $30, then the fall in international price of crude oil is more than 50% since the beginning of the year. We’ve seen the cedi appreciating by more than 5.6% from the beginning of the year, yet the local pump price has not gone down by more than 5% from the beginning of the year, that’s woefully inadequate; one will have expected that these two key variables -the international price of crude oil and also the local currency appreciation against the US dollar - will have given consumers some form of relieve. We thought that when prices go down it goes to support positively the disposable income of Ghanaians; however, we don’t see fuel prices going down substantially, the OMCs are also complaining of the price margins.

“We are losing out on two fronts; one is the fall in projected revenue and also the possibility of much lower fuel price at the pumps.”

Mr Sakyi said the decline in oil revenue will affect funding for the free Senior High School education policy and other key sectors of the Ghanaian economy.

“I do not see fuel price falling at the pump anytime soon; in the worst-case scenario it is going to stay the same, or we will see a marginal reduction but not a substantial one to match with the international fall in price in both crude and fuel prices,” he said.

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