Crude Oil and Refined Products Market Review and Outlook  

The increasing global investment in the electric vehicle (EV) supply chain continues to threaten the demand for crude oil. According to the International Energy Agency’s (IEA) global EV Outlook report, almost one in three cars on the roads in China and almost one in five in both the United States and the European Union will be electric by 2030. This shift will have major ramifications for the global economy, especially the energy sector.

In addition to weak macroeconomic fundamentals, lackluster demand, and increasing production, crude oil demand continued on a downward trend. Crude oil prices declined by about 3.04% from USD85.0780/bbl in Q2 to USD82.4900/bbl in Q3.  The crude oil price increase of about 4% in Q2 is largely attributed to tensions in the Middle East. But persistent deflationary pressure in China and other European countries was also a contributing factor.

The United States expanded its sanctions on Iran’s petroleum and petrochemical sectors as a response to the Iranian missile attack on Israel with an aim is to deny the Iranian government the funds to support its nuclear programs. However, it is uncertain the impact of these sanctions on global prices due to the increasing adoption of EVs and other renewable energy equipment as well as the continuous decline in global commodity demand.  

The international price of crude oil, diesel, and LPG declined by 3.25%, 3.47%, and 0.56%, respectively, while petrol increased slightly by 0.70% in the window under review. This represents a year-on-year decline of 14.76% and 27.61% for petrol and diesel respectively, while LPG increased by 16.70% within the same period. 

FuFeX30 and Spot Rates

The Fufex30^[1] for the first selling window of November (1^st to 15^th November 2024) is estimated at GHS16.8000/USD, while the applicable spot rate for cash sales is GHS16.6000/USD based on quotations received from oil financing commercial banks.

The BoG’s bi-weekly FX auction to BIDECs in the 1^st to 15^th November 2024 pricing window for the purchase of petroleum products was US$20 million, representing 26% of BIDECs’ bid. The FX rate at which the BoG auctioned to BIDECs rose from GHS10.5151 in January to GHS16.3933 per USD in November, representing a depreciation of 55.90% year-to-date. The sharp depreciation of the cedi is currently robbing consumers of the benefits of the global decline in crude and petroleum product prices.

The Ex-Refinery Price Indicator (Xpi)

The Ex-ref price indicator (Xpi) is computed using the referenced international market prices usually adopted by BIDECs, factoring in the CBOD economic breakeven benchmark premium for a given window, and converting from USD/mt to GHS/ltr using the Fufex30 for sales on credit and the spot FX rate for sales on cash.      

Ex-ref Price Effective 1^st to 15^th November 2024

Taxes, Levies, and Regulatory Margins

Total taxes, levies, and regulatory margins within the 16^th to 31^st October 2024 selling window accounted for 22.52%, 22.26%, and 13.48% of the ex-pump prices of petrol, diesel, and LPG, respectively. 

OMC Pricing Performance: 16^th to 31^st October 2024

Pump prices of petrol, diesel, and LPG have continued to surge since the beginning of the year, primarily due to the depreciation of the cedi. 

Although crude and petroleum products prices have been on the decline in the international market since April, the surge in pump prices continues to persist due to the reducing value of the cedi, which has depreciated to about GHS15.5o per USD. 

This trend illustrates the unprecedented impact of the FX on the prices of petroleum products at the pumps and the correlation between FX and pump prices.

The Ghana Cedi has depreciated by an average of over GHS4.5000 against the USD since January 2024, pushing pump prices to their highest in over 15 months. The increasing pump prices are significantly attributed to the depreciating cedi because, although the international market price of petrol and diesel declined significantly by about 27.85% and 33.71% respectively on a year-on-year basis, local pump prices of petrol and diesel rather rose by 3.4% and 4.4% respectively in the same period. 

Pump prices of petrol have increased by over 50% since March 2022 and by over GHS2.40/Ltr on average since January 2024. Petrol pump prices, which averaged GHS9.3390/Ltr in 2022, are currently being quoted at about GHS14.3780/Ltr by some OMCs. The pump price of petrol rose by 5.281%, largely attributed to the sharp depreciation of the cedi.

Pump prices of diesel rose by about 2.791% from GHS14.1180 to GHS14.5210 due to the surge in global prices and the depreciation of the cedi. Diesel prices are expected to surge in the 1^st to 15^th October pricing window. 

The rise in the price of LPG has been due to the increase in global demand and the depreciation of the Cedi. In the window under consideration, some LPGMCs sold LPG per kilogram at GHS17.00. The continual increase in the LPG prices at the pumps will most likely defeat the government policy to increase national LPG penetration to about 50% by 2030.

The government and the Central Bank should adopt measures that will stabilize the cedi and allocate sufficient FX for oil importation to curtail the impact of the depreciating FX on pump prices.