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IES cautions gov’t over hedging oil import

Ken Ofori-Atta - Finance Minister
Ken Ofori-Atta - Finance Minister

The Institute of Energy Security(IES) is advising government to be cautious in hedging its import of oil.

This follows a report by Reuters that government is considering hedging its oil import after the price of Brent crude saw an increase from about 65 dollars per barrel to 71 dollars per barrel this week.

“It’s a challenge and we are working on a comprehensive oil risk management strategy to ensure we remain on track … Buying some call options is most likely,” a source at the Ministry of Finance told the Reuters News agency in Accra.

But speaking to Citi Business News, the Executive Director of  the IES, Kwesi Anamua Sakyi cautioned that government must consider all predictions before it commits the country into such a transaction.

“Hedging against an investment risk means strategically using instruments to offset the risk of adverse price movement. It is a good tool used to mitigate risks. But let ask, what is the reference that government wants to use in setting the hedge price.? If you are not careful and you don’t do proper analysis you stand to lose in the future,” He warned.

According to Mr. Anamua Sakyi, there is the need to consider all options since the “IMF is projecting something around 53 dollar per barrel by close of year, [while] the World Bank is also quoting a similar figure”.

He pointed out that the only group forecasting a high price is OPEC, which is pegging the price above 70 dollars per barrel by close of year.

“OPEC is quoting 75 dollar per barrel, we have all these groups coming up with different figures. Which figure are we going to rely on, so it is important to do our own proper analysis of what the future price of oil will be,” he stressed.

Meanwhile, Mr. Anamua Sakyi described the increase in the price of oil as a positive development that could impact on revenue if production is stable from Ghana’s oil fields.

By: Lawrence Segbefia/citibusinessnews.com/Ghana

 

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