The Coordinator of the Civic Society Platform of Oil and Gas, Mohammed Amin has advised government to continue the hedging of oil prices with oil companies.
He said studying the current demand and supply of crude oil on the world market, the prices are not expected to decrease anytime soon.
Mr Amin made the analysis on Radio Ghana�s current affairs programme �Behind the News.�
Meanwhile, Daily Graphic reported that the government is likely to increase the scope of the crude oil hedge arrangement to cover more quantities following the overwhelming success of the programme which has so far raked in over $70 million to the state.
Official sources at the Ministry of Finance and Economic Planning told the Graphic Business that gains made in �taking the insurance cover for the crude oil imports� has convinced many about the need to increase the hedge quantum from a million barrels a month or 50 per cent of the country�s crude oil requirements (excluding requirements by the Volta River Authority) to about 70 per cent of the requirements.
The Finance Minister, Dr Kwabena Duffuor put up a four-member team, the Dealers, to help with arrangements regarding crude oil trading, including pricing and hedging.
The team, made up of the Director of the Debt Management Department at the ministry, Alex Tetteh, Dr Sam Mensah, Yaa Asantewa Asante and Kwame Adu Darko Okyere-Mensuo, started hedging in October last year with a strike price of $82.5 per barrel when spot prices hovered around $74 per barrel.
In the first two months of the hedge government made marginal net losses, but it has since recorded net surplus, which summed up to over $70 million as of last month.
Mr Okyere-Mensuo explained that the Ghanaian arrangement was unique, as the payment was initially made by issuing sovereign bonds, the first time any African country had used such an innovative method.
The expertise exhibited by the Ghanaian team, which is anchored by Dr Duffuor, who takes the ultimate responsibility for all the hard decisions, has attracted interest from global capital institutions, which want to partner Ghana as counter parties.
Currently, Standard Chartered Bank, Citi Bank and BNP Paribas are the counterparties and according to Mr Okyere-Mensuo the panel may increase to six as seven new counterparties had presented their proposals and presentations to the government on their own volition.
He gave the assurance that the hedge programme would not end in July but would continue to December when the current arrangement would end, although the strike price would be different.
Mr Okyere-Mensuo is happy about the management of the programme so far, which he said required deep financial discipline, commitment and temperament, which the Minister of Finance had demonstrated since the programme went live.
�It was a very courageous decision and I am happy this has been skillfully managed. The aim was to guarantee the provision of the product on the market at affordable rates and bring stability in the petroleum market,� a member of the dealers team said.
The finance minister said in taking the decision to insure the crude oil price, the government considered the need to prevent a slip in economic growth as was the case not only in 1999/2000 but also in 2007/2008.
The price of crude oil is currently hovering around $114 per barrel, far above the $70 per barrel that the government had used as the benchmark in the budget for this year.
A hedge is an arrangement that enables a buying party (in this case Ghana) to buy a product (crude oil in this instance) at an agreed rate in future by paying a premium now to international insurance and oil companies based on a pre-determined maximum rate at which the country would buy the product.
By this arrangement, when prices rise in future above that pre-determined rate, the country will still buy the product at the agreed rate (which will be lower than the going market rate).
Dr Duffuor explained that hedging had been the reason why Ghanaians had not seen any price increases at the pumps since the beginning of the year although prices have increased from more than $90 per barrel in December last year to about $124 a barrel.
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