Government will soon come out with a policy framework that will insulate Ghanaians from the escalating crude oil prices on the international market.
In pursuit of this, a nine-member Risk Management Committee has been inaugurated with the responsibility to use an insurance instrument to cap the import parity price of petroleum products in order to achieve stability in the ex-pump(retail) price.
The committee will decide the price at which to hedge the country’s petroleum purchases, especially for petrol and diesel.
Hedging is a position established in one market in an attempt to offset exposure to price fluctuations in another market with the aim of minimising risk.
Mr. Kojo Fynn, Chairman of the National Petroleum Authority (NPA), who inaugurated the committee in Accra yesterday, said recent movements in the world price of crude oil made it imperative to implement the risk management policy as soon as possible to cushion consumers and the government.
“The major benefit to Ghanaian consumers is that the ex-pump price of petroleum can be held at stable levels over a much longer period of time than currently, thereby reducing the uncertainty for individuals and facilitating the management of energy cost by businesses,” he said.
He said expert advice had been sought to ensure that the amount and type of protection to be bought would be appropriate for the needs of Ghanaians.
He said Cabinet at its meeting on March 11, 2010, approved a Commodity Price Risk Management Policy submitted jointly by the Minister of Energy and the Minister of Finance and Economic Planning.
Commodities which are being considered for hedging immediately are premium gasoline and gas oil while crude oil is being considered to be hedged in the future.
It is estimated that 50,000 metric tonnes of gasoline and 80,000 metric tonnes of gas oil will be hedged per month.
Institutions shortlisted for the hedging project are Standard Chartered Bank, BP International, BNP Paribas and Citigroup.
He said “the price of crude oil in the international market is hovering around 86 dollars and indications are that it will go up,” adding that the implementation of the hedging policy was a bit delayed hence the need to take quick action on it now.
Mr. Ralph Roland, Chairman of the committee in his acceptance speech said the need for a hedging instrument was very necessary, considering the continuous increase of crude oil prices in the international market.
He said in 2008 oil accounted for over 25 per cent of the total import bill of the country.
“The whole of last year was spent on designing the appropriate strategy and measures to be adopted to arrest the situation of price fluctuations on the international market.
This is not a profit venture, but it is a way to protect the government and the consumer,” he said.
Members of the committee are Alex Mould, Chief Executive of the NPA, Dan Amoah, Director in Charge of Pricing (NPA), Joseph Dadzie, an expert in hedging and Nana Akua Agyei, Attorney General’s Department.
The rest are Steve Opata, Bank of Ghana, Samuel Mensah, an expert in hedging, Jude Wordey, Ministry of Energy and Alex Tetteh, Ministry of Finance and Economic Planning.