Oil import bill skyrockets

Page 3 Jan 11/01/08

Story: Charles Benoni Okine

GHANA’s oil import bill skyrocketed to more than $2 billion in 2007, almost three times the bill for 2004, which stood at $775 million.
The increase, which has been attributed to the increasing price of crude oil on the international market and the high demand for crude oil products in all sectors of the economy, is also said to be impacting negatively on the nation’s foreign exchange reserves.
Experts say that the situation may even get worse this year with the various activities, such as the hosting of the Africa Cup of Nations (Ghana 2008), the United Nations Conference on Trade and Development (UNCTAD) meeting and the general election coming up.
In exclusive interviews with the Daily Graphic in Accra yesterday, the experts called for pragmatic measures to reduce the consumption of crude oil products in the country before the situation got out of hand.
Dr Ernest Addison, the Director of Research at the Bank of Ghana, said but for the resilience of the economy and its prudent management over the years, the import bill on crude oil would have been worrying.
He said the economy had largely been able to sustain the pressure because of the income from exports such as cocoa and gold which had seen impressive upward price movements on the international market, adding that “due to the trust in the economy, remittances have also gone up, while the nation is also enjoying the debt relief”.
As a result of the use of obsolete and high consumption machines and equipment in manufacturing and industry, the use of over-aged vehicles, among others, Ghana’s oil intensity (how many barrels of crude oil is used to generate a unit of Gross Domestic Product) is said to be extremely high.
Ghana was able to save $300 million in 2005 and $536 million in 2006 and it is feared that as the import bill on crude oil grows beyond expectation, it may be unable to save to build its foreign reserves.
Dr Addison, however, questioned the sustainability of the phenomenon and indicated that, as had often been done, there was the need to strategise to avoid shocks in the future when the situation reversed.
“From the economic point of view, we have been able to manage the situation well, but where do we go from here?” he asked.
He said there was the need for conservation by all to bring the bill down.
Dr Addison said energy generation had been a contributing factor and suggested alternative ways of generating power to enable the country to cut down on crude oil imports.
The Chief Executive Officer of the National Petroleum Authority (NPA), Mr John Attafuah, also expressed concern over the growing import bill on crude oil and added his voice to calls for conservation.
“The issue of conservation should be the talk of town because we may be entering a zone where we may not be able to find the money to do the imports because we may not be able to bear the consequences,” he cautioned.
Mr Attafuah said there was the need for the government to fully implement its directive to the various ministries, departments and agencies (MDAs) to cut down on fuel consumption, adding that “this general picture should be seen from the private sector as well because it is in our own interest as a nation”.
He raised the issue of the consolidation of the salaries of public and civil servants, arguing that “if the fuel for each person is consolidated in the salary, people will be more economic in consuming fuel and that will save the nation”.
Mr Attafuah said there was the need to practically restrict consumption to what had been approved, not by actual volumes but by consumption.
He said the situation at the moment went beyond politics because “fuel conservation is critical if we are to save the economy by having fuel available all-year round”.
Asked whether the deregulation of the petroleum sector which, among others, had, to a larger extent, caused consumers to pay the full cost of the fuel they bought on the market, had made an impact on consumption, Mr Attafuah replied in the negative and described the situation as a bit surprising.
He, however, noted that deregulation had had a significant impact on the economy because there were no debt build ups and that had also helped with the growth and stability of the economy.