Ghana’s subsidy on petroleum products cost govt GH¢267.6m as at September 30 – Dr Duffuor

Ghana’s Finance Minister Dr Kwabena Duffour says the government has subsidize ex-pump price of petroleum products to the tune of GH¢267.61 million as at September 30, 2011 from the beginning of the year.

Reading the 2012 budget themed “Infrastructural Development for Accelerated Growth and Job Creation,” Dr. Duffour attributed the cost of subsidy to the rising crude oil prices on the world market.

“…rising crude oil prices has meant that Government has had to subsidize ex-pump price of petroleum products to the tune of GH¢267.61 million as at September 30, 2011,” Dr Duffour told Ghanaian lawmakers November 16, 2011.

The entire under-recovery of petroleum pricing for the year, Dr Duffour says is estimated to be GH¢364.94 million based on the assumption of crude oil price of $110.23 per barrel.

He noted that the government has put in place a simple hedging mechanism to mitigate the impact of crude oil price fluctuations on crude oil receipts.

The Minister indicated that the “call option is adopted to manage oil import prices whilst the put option is adopted to smoothen fluctuations in crude oil export receipts” adding that the hedging has contributed significantly to the stability of the economy in 2011.

In order to protect the revenue, Dr Duffuor told the House that “the scope of the hedging programme was expanded in May 2011 to include petroleum revenues. The put option has been adopted under which Ghana has the option to sell crude oil at a price of $107.00 per barrel.”

He disclosed that currently, 100% of anticipated receipts of crude oil sales have been hedged to the end of 2011.

He also announced that the government hedging programme on petroleum has worked very well to reduce fluctuations in the oil export revenues and expenditures on imports.

By Ekow Quandzie