The Institute of Energy Security, IES, has advised government to benchmark expected revenue from petroleum receipts around 35 dollars per barrel.
The 2020 national budget pegged petroleum prices for export at 60 dollars per barrel. However, the outbreak of COVID-19 caused prices of crude oil on the world market to drop to as low as 20 dollars per barrel.
According to IES, the presentation of the Mid-Year Budget in July, should provide an opportunity for the Finance Minister, Ken Ofori-Atta, to adjust the figures downwards.
In the 2020 budget, government was hopeful of raising about 1.2 billion cedis from the export of petroleum products.
But with the outbreak of COVID-19, the Finance Minister will be compelled to review the prices downward.
Speaking to Citi Business News, the Executive Director of IES, Nana Amoasi VII (the seventh), said the Finance Minister must be realistic in making projections not to throw the budget out of gear.
“No one saw the COVID-19 pandemic coming. And it has really suppressed demand for crude oil and fuel around the globe. If there is less demand for a commodity, the price will likely fall. And that is what we see today as oil is hovering around the $40 per barrel mark. We went as low as 25 to 20 dollars per barrel at a point because we were on lockdown. Thanks to the easing of restrictions and the agreement by OPEC members to cut back on production, we are just around the 40-dollar mark,” he said.
Cautioning the Finance Minister not to balloon revenue expectations from oil, Nana Amoasi VII (the seventh) said there is likely to be a second wave of the spread of COVID-19 as borders are reopening across the globe.
He maintained that it may take two years for oil prices to return to pre-COVID times, hence the need for government not to expect to make significant returns from oil in the interim.
“Now we have seen the easing of the lockdown. And some experts tell us that there is a likelihood of a second wave of COVID. If there is, then of course we will go back to lockdown and the same protocol we were observing from the beginning of COVID. This means that the price will also fall again and that will impact on government revenue in Ghana. We need to be careful about what we project in July when the Finance Minister visits Parliament,” he said.