Editorial: Oil decline, long-term threat?

Meanwhile, the country’s steady decline in oil production could be a long-term threat to fiscal stability, eroding a once-reliable revenue stream and exposing the budget to heightened volatility.

With crude output falling consistently after peaking in 2019 and petroleum receipts dropping sharply in recent years, it definitely doesn’t appear far-fetched!

An expert has posited that the country is entering a structurally weaker phase of its oil cycle – one defined not only by declining volumes but also limited new investment and weak financial buffers.

To him, the trend raises serious concerns about sustainability of petroleum-funded spending and the state’s capacity to absorb future shocks in an inherently volatile sector.

Crude oil production declined to 37.3 million barrels – down from 48.24 million barrels in 2024 according to the Public Interest and Accountability Committee’s (PIAC) 2025 annual report, translating into a 43 percent drop in petroleum revenue from US$1.36billion to US$770million.

This downturn has been worsened by delayed liftings and absence of inflows from the Tweneboa-Enyenra-Ntomme (TEN) field, further tightening revenue flows.

“This trend has been clear for years. The issue is not whether production would decline, but whether we prepared for it.”  Successive efforts have been made to revive activity through fiscal incentives and renewed investor engagement.

On the fiscal side implications of sustained revenue decline are becoming more pronounced, particularly for projects funded through petroleum receipts.

The Ghana Stabilisation Fund (GSF) was established to cushion the budget against petroleum revenue volatility; however, it has been consistently drawn down and maintained at relatively low levels, limiting its effectiveness.

Over the years, the Fund has hovered between US$100million and US$150million – far below what is required to serve as a meaningful buffer.

There are clear legal provisions governing how these funds should be managed but are we witnessing these today? Production will decline over time and prices will fluctuate – and that is why the GSF was created to provide a buffer against predictable shocks.

The challenge has been in its implementation, since mechanisms under the Petroleum Revenue Management framework are designed to manage such volatility.

Without rebuilding buffers and enforcing the rules governing petroleum revenue management, Ghana will remain exposed – repeating a cycle in which predictable shocks continue to translate into avoidable fiscal strain.