Fuel prices could drop by February

Barring any further depreciation of the Ghana cedi, ex-refinery prices of petroleum products should “fairly drop” in the next selling window, which is from February 1 to 15, 2016, the Chamber of Bulk Oil Distributors (CBOD) has said in its latest market update.

The average world market price for the December 27 to January 11 pricing window (used to set prices for sales between the 16th and 31st of January) dropped by 3.95%, 0.83% and 5.19% for Gasoil, Gasoline and LPG respectively as compared to the previous pricing window.

This, however, did not reflect in fuel prices on the Ghanaian market due to depreciation of the Ghana cedi against the US dollar, CBOD noted.

Just half-way through the 12th - 26th January pricing window used to set pump prices for the first half of February in Ghana, prices have already recorded a further fall of about 12.7%, 10.5% and 15.54% for Gasoil, Gasoline and LPG respectively on the world market.

In Ghana, ex-pump prices of petroleum products are made up of ex-refinery price, taxes/levies and marketers’ margins, and so if the cedi remains stable CBOD expects some level of reduction in prices at the pump.

This would come as relief to a lot of Ghanaians, who have been protesting government’s decision to intercept part of the consumer surplus by introducing new levies and taxes, and hiking existing ones.

The new levies are captured under an Energy Sector Levies law, which was passed recently by parliament to “harmonise energy sector levies”.

Under the new regime, the TOR Debt Recovery Levy has been subsumed under a broader Energy Debt Recovery Levy, part of which will go into settling debts owed to Bulk Oil Distributors.

Other levies include Price Stabilisation and Recovery Margin, the Public Lighting and National Electrification Scheme Levy, and an increase to the existing Road Fund from GHp7.3 to GHp40 per litre.

Crude prices dropped to a 12-year low at US$27.67 on the ICE Brent market -- which continued to see high volatility on the back of a supply glut and waning global demand amid faltering global economic growth.

This was mainly due to Iran’s return to the international oil market, with a promise to increase oil shipments by 500,000 barrels per day after international sanctions were lifted.

According to the International Energy Agency, Iran is expected to be able to ramp up production to pre-sanction levels of 3.6 million barrels per day within six months. This prospect continues to pose a bearish outlook for crude prices.