Fuel prices go up again

The Institute for Energy Security (IES) has once again been vindicated over its warning last week that fuel prices could increase marginally in its projection for this month’s second pricing window, spanning October 16-31 2018.

The Institute had attributed the expected increase to a rise in the average Brent crude price by 5.7 percent with a corresponding increment in the prices of Gasoline and Gasoil on the international market.

The Institute last month warned fuel prices could cross the GhC5 mark in the first window of September and it happened even though the government had absorbed some cost.

For this window, IES Research and Policy Analyst Mikdad Mohammed said the increments recorded so far represent about 2.74% change in price or 0.14 pesewas increment on every litre.

He however said that “some oil marketing companies (OMCs) could keep prices same to maintain market share as part of the deregulation policy”, advising that consumers watch out for competitive prices to make the best choice.

Currently, a litre of diesel and petrol is being sold at GhS5.21 across all major filling stations, including Total and Shell.

Government has stated that but for their intervention, prices would have been higher than it is now, sighting the removal of some taxes and levies including the reduction of the Special Petroleum Tax from 17.5% to 13% and abolishing excise duty on petroleum products.

“Without government intervention…prices today, would have been GH¢5.54 per litre for petrol and GH¢5.55 per litre for diesel,” Energy Minister Mr. Amewu had said two weeks ago.

The IES is calling for the total scrapping of the Special petroleum tax, which it says represents about 10% of the price of fuel per litre.

Below is IES’ full statement released October 14th.

REVIEW OF FIRST PRICING WINDOW OF OCTOBER 2018

Local Fuel Market Performance

In the window under review, some select Oil Marketing Companies (OMCs) reviewed their prices downwards to maintain market shares, while largely prices stayed unchanged as projected by the institute. Gasoil and Gasoline continue to be sold on average terms at GHc5.09 and GHc 5.10 respectively after increasing by approximately 4% within the first window of September 2018.

IES Market-Scan shows Union Oil, GOIL, Total, Shell, Zen Petroleum, Frimps, Pacific, and Lucky selling the least priced fuel on the market relative to other OMCs.

World Oil Market

An observation of the international oil market reveals Brent Crude traded at an average price of $83.91 per barrel within the period under review.

Within the window, crude oil price peaked at $86.29 per barrel, seeing a gradual decline as a result of the International Monetary Fund (IMF) revision of global growth forecast for 2018 and 2019.

Compared to the previous average price of $79.32 per barrel, average Brent crude price has since an upward adjustment of 5.7%.

In Standard and Poor’s Global Platts analysis, Gasoline prices went up by 0 94% to close trading at $737.93 metric tonne, from a previous trading price of $731.07 per metric tonne; while Gasoil which sold at a previous price of $689.25 per metric tonne also increased by 6.37% to close trading at $733.14 per metric tonne within the Pricing-window under review.

Local Forex and Fuel Stock

The Forex performance of the local currency against the U.S. Dollar for the window recorded a very marginal depreciation compare to its 1.2% appreciation from the last window. Data gathered by IES Economic desk shows the cedi trading at GH¢4.91 a slight reduction from the GH¢4.87 that heralded the last window.

The country’s total fuel stock saw approximately 37,400 metric tonnes of Gasoil, 12,700 metric tonnes of LPG, 45,500 metric tonnes of Gasoline and 30,500 metric tonnes of ATK added over the last 15 days.

PROJECTIONS FOR OCTOBER 2018 SECOND PRICING-WINDOW

Considering the fact that average Brent crude price has gone up by 5.7% with a corresponding increment in the prices Gasoline and Gasoil on the International market, the Institute for Energy Security (IES) foresees a slight increment in the price of fuel on the market.

While the cedi experiences a marginal depreciation in the closing window, there is good news in the operationalization of the Oil Forex Market Platform currently undergoing review. Despite the expected marginal increment, some OMCs could keep prices same to maintain market share as part of the deregulation policy.

Signed: MIKDAD MOHAMMED, Research Analyst, IES