IES demands a fall in fuel prices by 16%

The Institute for Energy Security is demanding for a 16% fall in fuel prices due to the drastic drop in prices on the world market.

In a statement signed by its Research Analyst, Raymond Nuworkpor, the Institute said, “a reference to the significant fall of 33.36% in Brent crude price, coupled with the considerable drop in the prices of Gasoline (51.29%) and Gasoil (27.96%) on the international market, IES  foresees prices of fuel on the local market dropping by 16% – 24% in the first Pricing-window for April 2020”.

The expected fall according to the Institute is a reflection of market fundamentals as accepted in a deregulated market structure.

“The price projection, however, takes into consideration the significant drop in the value of the Cedi, relative to the US Dollar.”

Read full statement below:

FUEL PRICES MUST FALL BY AT LEAST 16% FOR CONSUMERS

REVIEW OF MARCH 2020 SECOND PRICING-WINDOW

Local Fuel Market Performance

Fuel prices at the pump experienced some 8.8% average reductions across some major Oil Marketing Companies (OMCs), as against the National Petroleum Authority’s pronouncement of 15% reduction for the Pricing-window under review. While Shell (Vivo) reduced Gasoil & Gasoline by roughly 4.3%, Goil and Total Ghana shaved-off approximately 11% for Gasoil and Gasoline. Zen Petroleum on the hand gave away a whopping 14% for both products to sell at Gh¢4.25 per litre; thus making it the OMC with the least selling price on the market. As a result, the national average price of fuel per litre at the pump stands at Gh¢4.88 and Gh¢4.90 for Gasoline and Gasoil respectively.

Aside Zen Petroleum, Benab Oil, Nick Petroleum, Frimps Oil and Champion Oil were counted by IES Market-scan as some of the OMCs with least-priced fuels on the local market, relative to others in the downstream petroleum sector.

World Oil Market

Crude oil prices remain largely below $30-margin for this window due to a drowning global oil market as a result of unmanageable surplus as world’s largest economies lockdown, cutting consumption by 25%. As a result, Brent crude had a thunderous fall by 33.36% from $45.89 per barrel to close at $30.58 per barrel on average terms during the period under review.

S&P’s Platts benchmark for fuels shows average Gasoline price crashing by 51.29% to close at $211.52 per metric tonne, from a previous average of $434.23 per metric tonne; while Gasoil plummeted by 27.96% to close trading at $304.57 per metric tonne, from a previous average of $422.80 per metric tonne.

Local Forex

Data collated by IES Economic Desk from the Foreign Exchange market shows the Cedi depreciated by (4.68%) against the U.S. Dollar, trading at an average price of Gh¢5.59 to the U.S. Dollar over the period under review; from a previous rate of Gh¢5.34 recorded in the first Pricing-window of March, 2020.

PROJECTIONS FOR APRIL 2020 FIRST PRICING-WINDOW

Reference to the significant fall of 33.36% in Brent crude price, coupled with the considerable drop in the prices of Gasoline (51.29%) and Gasoil (27.96%) on the international market; the Institute for Energy Security (IES) foresees prices of fuel on the local market dropping by 16% – 24% in the first Pricing-window for April 2020, and in line with the Price Deregulation regime.  The price projection however takes into consideration the significant drop in the value of the Cedi, relative to the US Dollar.

SIGNED:

Raymond Nuworkpor

Research & Policy, IES

(054-388-7669)