Another fuel price hike imminent
Performance of the local fuel market
Fuel prices at local pumps in Ghana have increased during the current assessment window. Prices of petroleum products per liter rose from around 6.50 Gh¢ on average at most pumps to reach 6.70 Gh¢ in the window under review.
The price increase was driven by rising prices on the international market despite the government’s extension of the suspension of the Price Stabilization and Recovery Levy (PSRL) on Oil Price Rise (PBU). The majority of Oil Marketing Companies (OMC) have increased their prices at the pump by 2 to 3%.
The current national average price for both products is set at 6.70 Gh¢ per litre, which represents a 3% increase compared to the previous window.
The IES Market-Scan selected Star Oil, Benab Oil, PetroSankofa, Goodness Oil and Top Oil as the OMCs with the cheapest gasoline and diesel in the local market for the pricing window under study.
Pump prices for these MOC ranged between 6.52 Gh¢ and 6.43 Gh¢ per liter for both products. Conversely, the OMCs with the most expensive products per liter were Total, Shell, Engen, Shell (Vivo) and Puma, selling between 6.75 Gh¢ and 6.85 Gh¢ per liter for the two main liquid fuels .
world oil market
In the pricing window that just ended, international benchmark Brent saw a price rally over the period, with prices selling on average at around $80.3 per barrel. The price increase represents a 7.42% rise from the previous window’s average price of $74.75 per barrel.
Oil prices from January 2022 started on a positive note for bullish oil prices with prices starting the year on the first trading day of the year January 3, 2022 at $78.98 per barrel and reaching more than $84 a barrel in less than 10 days, which represents an increase of around 6.7%. Interestingly, the oil market was devoid of any major market volatility during the just ended pricing window, as it had in previous windows.
Of all the major events, the OPEC+ meeting held on January 4, 2022 stands out as the most notable industry event in the just-ended window that has had the propensity to shake the market. The meeting concluded with a resolution to stick to the planned production of 400,000 barrels per day.
Partial supply disruptions from the Libyan supply, as well as the Ecuadorian supply, contributed to the price increase. The situation was met by robust demand that exceeded market expectations. This followed the emergence of the Omicron variant of the virus and its expected impact on economic activities and energy demand. This was not the case as the impact was minimal compared to what was expected.
There are also concerns about the expansion of OPEC+ production quotas over actual production figures from member countries’ wells. Of the 18 countries that make up the alliance, 14 were unable to meet their production quotas for December 2021, resulting in lower production figures for the month. As a result, the total incremental supply realized by the alliance was 310,000 barrels per day against the planned 400,000 barrels per day.
Prices for refined products, gasoline and diesel fuel, as monitored on Standard and Poor’s (S&P’s) Platt’s global platform, recorded significant changes during the period under review. While the price of gasoline rose 9.46% to close the window at $774.94 per metric ton, the price of diesel also rose during the period by 8.52% to close trading at $696.00 per metric ton from its previous price of $641.38 per metric ton.
Data from the IES Economic Desk monitored from the foreign exchange (Forex) market shows that the Ghanaian cedi depreciated further against the US dollar by just 0.3% on average during the first window of January pricing to close trading at 6.26 Gh¢ against the US dollar. from the previous window rate of 6.24 Gh¢ to the US dollar.
Projections for the second January 2022 pricing window
Due to the 7.42% rise in the price of Brent, the 9.46% rise in the price of gasoline, the 8.52% rise in the price of diesel and the depreciation of 0.3 % local currency to US dollar; the Institute for Energy Security (IES) advises consumers to be on the lookout for a further increase in fuel prices at the pump, between 30 Ghp and 40 Ghp per litre. Imminent price increases could force some OMCs to sell petrol and diesel for the first time at 7.00 Gh¢ per liter at the pump.