The global oil industry is saddled with a sudden lack of demand due to the coronavirus economic slowdown. Early this week, Brent crude oil – which is similar in quality to Ghana’s crude – was trading at a long-term low of just US$18 per barrel.
This means that all Ghana’s fields are currently financially unviable. The global market price for Brent crude hit a peak of US$147 a barrel in 2008, just to put things in perspective.
The current price crash is still widely seen as a relatively short term phenomenon that will subside before end of this year.
Another factor driving the oil price downward is the oil economics dispute between Saudi Arabia and Russia, which has led the former – the world’s biggest exporter of crude – to flood the global market with cheap oil. It is uncertain how long the situation will prevail before it is resolved.
Oil prices have slumped by around 80% this year as the pandemic has spread across the world – routing financial markets and leading to what could be the worst economic meltdown since the Great Depression of the 1930s.
The volatility in oil markets has prompted CME Group, the world’s biggest commodities exchange, to raise margins on crude oil futures.
Meanwhile, Paa Kwasi Anamua Sakyi – Executive Director for the Institute of Energy Security, IES, has averred that the drop in Brent Crude price will affect the country’s revenue.
The IES boss believes the benchmark Ghana also sells its product at will also fall, and this means either all oil producers in Ghana will have to shut down or also be prepared to sell at a lower cost – and that means lower revenue.
Following the price crash, many Ghanaians have expected prices to drop at the local pumps. A group calling itself the National Concerned Drivers Association is calling on government to, as a matter of urgency, reduce pump prices of fuel.
While all this is taking place, the Public Utilities Regulatory Commission (PURC) has maintained a stoic silence and is probably studying the situation – believing that the price crash is a fleeting phenomenon because of COVID-19.
Whatever the situation, the reality is that the price of oil has drastically slumped on the world market; and that should reflect in the domestic price since we operate an automatic price adjustment formula in line with deregulation of the petroleum sector.