The current world market price for crude oil hovers around $45 a barrel. This median price changes almost daily and nobody seems to be able to assure the world that it will come down anytime soon.
The reasons for this astronomical price rise from a low of around $25 about 18 months ago is due to many factors, not least of which, is the United States invasion of Iraq. Another significant factor is the trouble facing the Russian company Yukos, its largest oil producer, which is embroiled in an alleged tax evasion scam and is being ordered by the Putin government to pay penalties totaling close to $4 billion.
The Organization of Petroleum Exporting Countries (OPEC) has said ideally it would like to see the price stabilized around a maximum of $28 to $30 but has insisted that it has no extra capacity to increase its production in order to bring prices down.
During these turbulent times in the oil market, oil producing countries have been smiling all the way to the bank as they rake in billions of dollars from the rapid price increases on the crude oil market.
Experts say there seems to be no immediate end in sight for increased demand for crude oil, especially with the heightened demand from energy-hungry China and India, whose economies are growing at the rate of 10% and more.
For a non-oil producing country like Ghana, the rise in crude oil price can spell economic havoc as our budget projections, which are usually predicated on stable crude oil prices, are thrown out of gear.
When the NPP government raised prices of petroleum products in 2002, many people screamed blue murder, with the opposition parties, especially, gloating that it was an insensitive and people-unfriendly action.
The government countered by pointing out that the previous NDC government had deliberately kept on subsidizing the petroleum sector because of political expediency and that it had kept prices down in order to win the 2000 elections.
As fate would have it, despite pumping ¢990 billion into the economy during the last quarter of 2000, the NDC-led government lost the elections. The new government set out to iron the kinks in the economy and even went as far as declaring the country HIPC in order to gain some relief from the debts we owed the Bretton Woods institutions.
The Tema Oil Refinery (TOR) was said to owe trillions of cedis due to the government subsidies.
The country now has come full circle since those days and ironically the NPP government is now facing almost the same problems the NDC faced in 2000. This is an election year and with barely four months left to seek a fresh mandate from the electorate, the NPP government would surely be committing political suicide if it increased prices of petroleum products at this critical time.
The opposition NDC is hollering that the government should adjust prices to conform to the price increases on the world market for crude oil, knowing very well the political implications it would have for the NPP. Meanwhile, according to the government it is in a better position to maintain the supposed ¢100 billion subsidy on petroleum products because it is doing it not out of political expediency but as a "conscious policy of government."
According to Dr. Osei Akoto, Deputy Minister of Finance and Economic Planning, the government had "a lot of resources from the HIPC benefits to absorb the imbalances."
In addition, he said there was no basis for the hue and cry to raise petroleum prices since "part of the subsidy requirement is obtained from cocoa revenues which have risen appreciably and government is also going to divest itself of its holdings in Ghana Commercial Bank (GCB) and the Produce Buying Company (PBC). Funds from this divestiture shall also be channeled towards meeting the cost of subsidy."
The Chronicle hopes all these explanations from the government work out well and that when, after the elections, things cool down, it would be able to equally explain away the hefty increases that would have to be made, assuming oil prices remain on the high side.
We, as citizens, can only hope that everything turns out well and the present government is not acting this way simply to win the elections. Time will surely tell if power-seeking politicians are not manipulating us, as a people. We live to see.