Crude experienced a free fall from as high as $130/bbl to as low as $98/bbl in a span of about two weeks, before recovering only marginally to around $100/bbl at the start of trading today, but fuel prices is forecast to continue on its rising streak since last year.

An oil supply shortage is invariably bad news for consumers of oil products— as that triggers skyrocketing prices at the pump— but even ‘worse’ is when an expected bounce back in oil supply does not equally filter through prices at the pump to reflect reduced prices.

At least, as prices plummet, it would not be far from market expectations to see the biggest Oil Marketing Companies (OMCs) start adjusting fuel prices at the pumps to give drivers a much-needed break from the burden of constantly rising prices.

While the depreciation of the cedi may be ‘holding the fort’ in this circumstance, in addition to the existing uncertainties in the market, the margin of decline in prices of crude on the global oil market could be reworked into the price per litre of fuel at the pump.

In fact, this is not too far-fetched. In December 2021, at a time when commercial drivers suspended their services to commuters, due to the constant rise in fuel prices, GOIL, one of the leading Oil Marketing Companies (OMCs), reduced its fuel price by 15 pesewas, noting that the action was as a result of a marginal fall in global oil prices.

Predictions of Fuel Price Hikes

In recent days, analysts and market forecasters have predicted a further rise in fuel prices beginning from today, March 16, 2022. The Institute of Energy Studies (IES) predicted a rise in fuel prices by at least 5 per cent from March 16, 2022, while the Chamber of Petroleum Consumers Ghana (COPEC) projects fuel prices to hit GHS9.00 for petrol and GHS10.00 for diesel from today.

As at Friday, March 11, 2022, the major retailers; Total, Shell, and GOIL sold a litre of petrol for GHS8.29, GHS8.49, and GHS8.22 respectively while Puma Energy, Petrosol, Allied sold a litre of petrol for GHS8.27. As at 11:40 am today, the price per litre of petrol remained the same for Shell at GHS8.49. Also, as at 2:33 am today, the price of a litre of petrol at a Total fuel station at Odorkor, a suburb of Accra, was sold at GHS9.70, increasing by GHS1.41/ltr, however, this is yet to be verified at its fuel stations across the country.

In the last three weeks, the ongoing geopolitical tensions have featured strongly as a downside risk to the global oil market, sanctions on Russian banks and energy market still remain. Just last week, OPEC shied away from changing any of its 2022 outlook figures, raising concerns of oil demand risks coming from Russia’s invasion of Ukraine. The Cartel claimed a prolonged war could derail the introduction of 4 million b/d of incremental demand this year.

However, news about the return of Iranian oil and the guarantees Moscow received that it could continue trading with Iran after sanctions are lifted sent crude prices below the $100 per barrel mark, the lowest level in three weeks, according to Oilprice.com.

In a LinkedIn Post, Dr Yusif Sulemana, an energy strategist, wrote:

“An announcement by President Joe Biden about Russian Energy export ban a week ago that pundits thought would have added to the prevailing bullish momentum turned out to be reining bearish sentiment on the market. Before the announcement, Brent crude was a $130/bbl, but now it [is] almost trying to break away from the dreaded 3-digit figure of $100/bbl.

“Interestingly, the factors that could have caused this phenomenon, such as OPEC abandonment of the supply cuts, US Shale Patch revamping of production, and the Iranian nuclear deal, are all yet to be activated formally. What then is the lead driver of the current bearish trend? Is it the case of the market now seeing some certainty and clarity with diminishing impact of the Russian-Ukrainian crisis? Or some natural demand destruction is setting into the market?”
Dr Yusif Sulemana

It may be early days yet to be certain about the outcomes of these events, as Dr Sulemana alluded. “There are more questions than answers and the coming days and weeks is something worth monitoring closely,” he wrote.

To be optimistic, when these events lead to a boom in oil supply, further constricting oil prices, consumers would expect to see prices at the pump fall too. And will OMCs in Ghana be ‘generous’ to cushion consumers with a downward adjustment in fuel prices?