Businesses in Ghana are worried that domestic petroleum prices at the pumps may soon be raised, following the sharp surge in global oil prices that have resulted from last Saturday’s drone attacks on Saudi Arabia’s biggest oil processing facilities, owned by state corporation, Aramco.

Even though global market prices have fallen from the short term highs reached on Monday for both Brent and West Texas Intermediate brands, which initially rose by some 20 percent in the wake of the attacks, Brent’s price of US$66.64 per barrel is still about 10 percent higher than it was immediately prior to the attack while WTI is 9.5 percent higher at US$60.06 per barrel.

Fortunately for Ghanaian consumers, the attacks came after the latest pricing window had been computed and which is effective from Monday, September 16 till the end of the month. A new pricing window will be announced on October 1 however and there are real fears that if the global price has not receded by that time Ghana’s National Petroleum Authority, in computing its price build-up, would be forced to announce a major increase in indicative prices.

The latest price build-up left indicative prices unchanged with the downstream retail market leader GOIL retaining its gasoline price at GH¢5.38 per litre and diesel at GH¢5.34 per litre. However, the next pricing window, which will consider exchange rates and global oil prices from September 12 – 26 will have to take into account the global oil price hike brought upon by last weekend’s attacks on Saudi Arabia’s oil production facilities.

The attacks have cut Saudi’s oil production by some 5.7 million barrels per day which amounts to half of its entire production. With Saudi being the world’s biggest supplier, providing 10 percent of global supply, this translates to a five percent cut in global production.

For now, though, the NPA, acting on behalf of the Government of Ghana is actively hoping that global prices will drop ahead of the next pricing window to enable it avoid computing a sharp increase in indicative prices.

Just yesterday, a 10 percent increase in public road transportation fares took effect, ostensibly brought about by government’s decision to revise upwards the rates on the Road Fund Levy, the Energy Debt Recovery Levy and the Price Stabilization and Recovery Levy as announced during the 2019 mid-year budget review in July and which has since been approved by Parliament.

Ironically, those tax rates were revised upwards by a government facing a 9.5 percent revenue shortfall – as compared to budgetary targets – for the first half of this year, even as petrol prices at the pump fell from an average of GH¢5.5 per litre as at June to GH¢5.355 by August. Evidently government, therefore, thought it could get away with a petroleum tax increase without an accompanying increase in transport fares but this has not happened. Any further increase in transport fares, resulting from an increase in petrol prices at the pump would generate widespread public disaffection.

The NPA is, therefore, hoping that the global supply situation is stabilized over the coming two weeks before the next domestic pricing window. While this is possible – Saudi has already restored part of its lost production and the United States says it is willing to release part of its 640 million barrels strategic reserves – it is still uncertain when Saudi can scale up to its pre-attack production levels.

Even more worrying is the rising geopolitical tensions in the middle east – by far the biggest source of global oil exports – involving the United States, Iran Iraq, Yemen and Saudi Arabia itself, which is unlikely to allow global oil prices fall back to their pre-attack levels in the short term.