Feature Article of Tuesday, 10 January 2012
Columnist: Prempeh, Alex
Candidate Prof. Evans Atta Mills promised Ghanaians petrol at GHc2.00 in 2008, but Ghanaians pay more than GHc6.00 per gallon. After consulting with major banks and brokerage houses and hedging Ghana’s crude oil purchase, the price Ghanaians pay is triple the price promised during his 2008 presidential campaign.
National Petroleum Authority quoted the new price of petrol as 175.48 pesewas per liter, which means the price of petrol per gallon is $4.42. One gallon is 3.78 liters. This is higher than the price paid at the fuel pump or petrol station in the United States. The dollar exchange rate is New Ghana cedi 1.55.
The current price of petrol in the United States is $3.40 per gallon. Ghanaians, with their meager incomes, pay 30% more than drivers in the United States.
NPA stated initially that the price increase of 15% was based on increase in the price of crude oil on the commodities markets in New York and London. When the issue of hedging came up, the new explanation given was the government has removed its subsidies on crude oil. The government must be forthcoming and see the hard ships this new increase, which is a triple jump of the promised price, pose on Ghanaians. What happened to the GHc2.00 per gallon price that candidate Professor Atta Mills campaign vehemently on to win the hearts and souls of the Ghanaian polity?
For now the professor’s promise of GHC2.00 per gallon for petrol was just that, an empty promise and a gimmick to win votes.
In a report published by the Graphic on September 7 2010, Mr. Alex Mould, the NPA boss, announced that NPA has hedged Ghana’s crude oil purchase at a price of $80. The report mentioned that the government of Ghana has purchased call options and will rollover the options every three months or upon expiration.
The buyer of a call option on a commodity has insurance and price guarantees, in this case at $80 a barrel. This hedge should protect Ghana when the price of crude oil rises above $80. Crude oil closed in New York at $99 a barrel at the end of the year 2011.
Back in October 2010, crude oil futures contract traded around $81 a barrel on NYMEX. NPA and Ministry of Finance purportedly hedged Ghana’s crude oil needs on the futures markets in New York and London.
The government listed - Standard Chartered Bank, PNB Paribas, Citi Bank, Shell and BP- as the counterparties or sellers of the insurance premium or call options for the hedge in crude oil. However, the premium paid for the insurance to buy crude oil at $80 was never disclosed.
Fourteen months after making an announcement that Ghana has bought insurance against higher prices, the government and NPA claim the need to raise prices because of the world price of crude.
This is like paying for auto insurance and upon having an accident and the insurance company smacking the customer in the face and denying coverage.
In the same news release from October 2010, the Ministry of Finance reported that Government of Ghana (GoG) has hedged crude oil from the Jubilee field at $107, and the counterparties and advisers were Citi Bank and Standard Chartered Bank. The GoG bought insurance to sell crude oil at $107 a barrel and paid a premium. MOF indicated that the GoG spent $66 million on this hedge.
Attempts to get Standard Chartered and Citibank to confirm or deny the hedge trade by the government of Ghana were not replied.
The Ministry of Finance and NPA do not find it necessary to explain to Ghanaians how the GoG spends money on behalf of the people of Ghana.
The NPA mentioned that the insurance purchase had duration of three months and would be rolled over at the end of the three month period and a new insurance placed to limit the impact of higher crude oil prices on Ghanaians. NPA owe Ghanaians the protection that the insurance coverage paid. Ghanaians wallow in poverty in the midst of vast natural resources.
In 2008, then candidate Professor Atta Mills and Ghanaians signed and sealed a promissory note for petrol at GHc2.00 per gallon. Vote for me and get petrol at GHc2.00. Ghanaians voted but President Mills has defaulted, and not only that, millions of dollars have been spent on purported insurance scheme to protect Ghanaians against higher prices, and all for naught. The default by President Mills means his government has accepted foreclosure in December 2012.
By Alex Prempeh.
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