Ghana may be forced to review its revenue target for oil next year if the prices of the commodity on the world market continue to plunge.
[contextly_sidebar id=”ufHXOB4AEslmRfZUUeji6UpcpLvcRlxY”]The price of a barrel of oil yesterday December 7th, 2015, fell below 40 dollars, the lowest since 2009.
The price of West Texas crude sank to $37.65 a barrel, a drop of 5.8%, while Brent Crude fell 5.3% to $40.73 a barrel.
The drop follows Friday’s decision by the Organization of the Petroleum Exporting Countries (OPEC) not to cut output despite the supply glut which is depressing prices.
There are fears however that the drop could worsen in the coming months and into next year as OPEC is not likely to consider its output ceiling – which had been set at 30 million barrels a day – until next June, after Iran is likely to have emerged from its sanctions regime to boost its own exports.
Projections by players in the industry on what figure to expect moving forward has been between 40 and 20 dollars a barrel.
Tough times ahead
Countries like Ghana who now rely heavily on oil revenue will be the hardest hit if the prices continue to tumble.
Since last year the country’s economy has suffered significantly following the drop in the prices of oil which pushed the finance minister Seth Terkper to review oil revenue projections.
If prices of oil continue to decline a number of infrastructure projects may be affected, also all government expenditure which rely on oil revenue for funding may be cut to suit the times.
The cedi will also be significantly affected if the prices of oil continues to decline.
An increase in revenue from oil, gold and cocoa helps boost the country foreign exchange reserves which helps tame challenges with demand and supply of foreign exchange and in turn keep the cedi stable.
Though Ghana also benefits from the drop in the price of oil on the world market because it is a net importer of the commodity its current economic challenges will only worsen if its revenue base continue to decline as two other commodities it relies on that is gold and cocoa are also not doing too well on the global market.
Likely review in 2016
Finance Minister Seth Tekper during his presentation of the 2016 budget statement in November, 2015 said government had pegged its bench mark projection for a barrel of oil at 53.05 dollars for next year in line with the International Monetary Fund (IMF)’s.
But if projections being made by industry players is anything to go by then this figure would have to be revised again.
On the positives however prices of petroleum products are expected to drop in the coming weeks following the slump in the prices of oil on the world market.
By: Vivian Kai Lokko/citifmonline.com/Ghana