High crude oil prices could help gov’t meet revenue target for 2022 – Seth Terkper
Former Minister of Finance, Seth Terkper, has indicated that although the revenue target for this year is too ambitious, the high crude oil prices could make a difference.
According to him, a sustained high crude oil price on the international market could help government rake in the much-needed revenue for 2022.
“Let me add that crude oil will make a difference because a lower benchmark will have been used by government. We are waiting to see if there will be modifications made to the benchmark in the mid-year budget review. Like ourselves, we used $56 to replace $99, now it’s going to be the reverse. So crude oil revenue is going to come in and is going to contribute to achieving the year’s revenue target,” he said.
Government this year has set for itself a target of GHS 100 billion from a revenue target of GHS 72 billion in 2021, with hope that the coming implementation of the Electronic Transaction Levy, in addition to other measures, will help in achieving the high revenue target.
So far, a barrel of Brent Crude oil has risen from about $76 at the start of this year to a high of about $140 in early March, before moderating to around $100 in the past few days.
The hike in the price of the commodity has been brought about mainly as a result of Russia’s military operation in Ukraine.
While the high price of Brent Crude oil has affected prices of petroleum products on the Ghanaian market, including the price of fuel at the pumps which has risen by about 50%, others believe government also stands to benefit the more prices stay high on the international market.
As a net exporter of oil, government in the 2022 budget set the benchmark crude oil price for the year at $61.23 per barrel, up from the $54.75 per barrel for 2021.
Despite a drop in the volume of oil exported by Ghana, data from the Public Interest and Accountability Committee (PIAC) has disclosed that Ghana’s revenue from oil production increased by 17.5% in 2021 to US$783.33 million by the end of the year, mainly on account of higher fuel prices.
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Meanwhile, oil prices slipped on Thursday amid thin trading volumes ahead of a public holiday, as traders weighed a larger-than-expected build in U.S. oil stocks against tightening global supply.
Brent futures were down US$1.14, or 1.1%, at US$107.64 a barrel, while U.S. West Texas Intermediate futures were off US$1.32, or 1.3%, at US$102.93 a barrel at 0632 GMT.
Both contracts on Wednesday had shrugged off a large build in U.S. crude inventories to end the trading session roughly 4% higher.
“Asian buyers have been absent today, with volumes potentially being curbed by the long weekend across most of Asia, Europe, and North America,” OANDA analyst Jeffrey Halley wrote in a note.
The International Energy Agency (IEA) on Wednesday warned that from May onwards roughly 3 million barrels per day of Russian oil could be shut-in due to sanctions or voluntary embargoes.
At the same time, major global trading houses are also planning to curtail crude and fuel purchases from Russia’s state-controlled oil companies in May, Reuters reported on Wednesday.
The probability of a EU ban on Russian oil being agreed may be almost zero, but no one will be able or wanting to say that clearly, Vandana Hari, founder of oil market analysis provider Vanda Insights said.
“And, even a continuing sabre-rattling will be enough to keep the risk premium alive.”
Despite signals that global supply disruption will persist, oil stocks in the U.S.
rose by more than 9 million barrels last week, the U.S. Energy Information Administration said on Wednesday, driven in part by releases from the nation’s strategic reserves. Analysts in a Reuters poll had anticipated just an 863,000-barrel build.
U.S. gasoline stocks fell 3.6 million barrels last week, far above anticipated levels, and distillate inventories also declined.
“The fact that oil continued to rally after such a large jump in U.S. crude inventories and that China concerns have suddenly been forgotten, is a serious warning signal to those pricing in the top of oil markets,” OANDA’s Halley said.
