Prof. Samuel Lartey
Business News
The global oil market is once again entering a period of turbulence, driven by escalating geopolitical tensions and disruptions to critical maritime energy routes.
From the Strait of Hormuz in the Persian Gulf to the Red Sea shipping corridor, threats to tanker routes have exposed the fragility of the global oil supply chain and triggered ripple effects across international markets.
For oil-importing economies such as Ghana, these disruptions carry significant implications for petroleum pricing, transportation costs, inflation and overall economic growth.
A fragile global oil supply chain
Oil remains the lifeblood of the global economy. Every day, millions of barrels of crude oil and refined petroleum products move across oceans through complex shipping networks that underpin industrial production, transport systems, and energy security worldwide.
However, recent geopolitical tensions have placed unprecedented pressure on these networks.
The Strait of Hormuz, the world’s most critical energy chokepoint, handles roughly 20 million barrels of oil per day, nearly one-fifth of global oil supply.
Any disruption to this narrow maritime passage immediately reverberates across international energy markets.
Recent hostilities in the Middle East have already caused oil shipments through the Strait to halt temporarily, pushing crude prices to around $119 per barrel, levels not seen since the early stages of the Russia–Ukraine war.
Energy analysts warn that prolonged disruptions could trigger a cascade of supply shocks:
1. Tanker rerouting through longer alternative routes
2. Higher shipping insurance premiums
3. Reduced refinery feedstock availability
4. Increased speculation in oil futures markets
Major producers are attempting to mitigate the crisis. For example, Saudi Arabia has redirected significant crude exports through pipelines to the Red Sea port of Yanbu to bypass the Strait of Hormuz.
Yet, such measures can only partially offset the loss of a route responsible for around 20% of global oil trade. The result is a volatile oil market increasingly sensitive to geopolitical risk.
Oil price volatility and the global market
Global oil pricing is determined not only by supply and demand but also by perceived risks to production and transportation. When shipping routes become unsafe, traders anticipate shortages. Prices rise almost immediately, even before any physical supply disruption occurs.
Recent market fluctuations illustrate this dynamic:
1. Brent crude surged close to $120 per barrel amid Middle East tensions.
2. At other times, expectations of increased production have pulled prices closer to $68–$70 per barrel.
These swings highlight the fragile balance between supply security and market sentiment. Because oil is priced globally in US dollars, developing economies face a double burden: higher crude prices and currency depreciation.
Ghana’s vulnerability as a net petroleum importer
Although Ghana produces crude oil from offshore fields such as Jubilee, TEN, and Sankofa, the country still relies heavily on imported refined petroleum products to meet domestic demand. This structural dependence means that global oil price shocks quickly translate into local pump price fluctuations.
In Ghana, fuel prices are reviewed bi-weekly under a petroleum pricing framework influenced by three main variables:
1. International crude oil prices
2. Exchange rate movements (cedi vs US dollar)
3. Taxes and statutory levies
Even small changes in any of these variables can significantly alter retail prices. For example:
1. Petrol prices in Ghana have ranged between GH¢10.56 and GH¢14.99 per litre between 2024 and early 2026, depending on global market conditions and currency trends.
2. Forecasts in 2025 projected petrol selling around GH¢14.52 per litre during periods of rising global prices and cedi depreciation.
These fluctuations illustrate how closely Ghana’s domestic energy market mirrors global oil volatility.
Pressure on Ghana’s petroleum ecosystem
The Ghanaian petroleum ecosystem comprises several interconnected actors:
1. Bulk Oil Distribution Companies (BDCs)
2. Oil Marketing Companies (OMCs)
3. The Tema Oil Refinery
4. Transport and logistics operators
5. Regulatory institutions such as the National Petroleum Authority (NPA)
Global supply disruptions can stress every layer of this ecosystem. When international crude prices spike:
1. BDCs face higher import costs and forex pressures
2. OMCs struggle to maintain stable pump prices
3. Government revenue projections from fuel levies fluctuate
4. Strategic fuel reserves become critical buffers
In 2025 alone, Ghana introduced multiple energy sector levies, including the Energy Sector Shortfall and Debt Repayment Levy (ESSDRL), to address accumulated energy sector debts. While these levies support fiscal stability, they also raise pump prices during global oil shocks.
Transportation costs and the cost of living
One of the most immediate consequences of rising fuel prices in Ghana is the effect on transportation. Road transport accounts for the vast majority of passenger and goods movement in the country. When diesel or petrol prices increase, commercial transport operators often raise fares. This has a domino effect across the economy:
1. Higher transport costs increase food prices
2. Logistics costs rise for manufacturers and retailers
3. Businesses pass these costs to consumers
Inflation, therefore, becomes closely linked to global oil price movements. Academic studies have found a positive long-run relationship between crude oil prices and inflation in Ghana’s economy. For households already grappling with economic pressures, even modest fuel price increases can erode purchasing power.
Implications for Ghana’s economic growth
Energy costs are a key determinant of national economic performance. Higher oil prices affect Ghana’s growth in several ways:
1. Increased Import Bill
Oil imports represent a significant share of Ghana’s foreign exchange spending. Rising crude prices widen the trade deficit and increase pressure on the cedi.
2. Inflationary Pressures
Fuel costs feed directly into the prices of goods and services, increasing the national inflation rate.
3. Fiscal Constraints
Government revenues may increase through fuel taxes, but higher subsidy pressures or social interventions can offset these gains.
4. Reduced Business Productivity
Industries dependent on diesel-powered logistics and generators face higher operating costs, affecting profitability and investment.
These dynamics underscore why energy security remains a critical pillar of economic planning.
Navigating the energy future
To reduce vulnerability to global oil shocks, Ghana must accelerate structural reforms in its energy and transport sectors. Key strategies include:
1. Expanding domestic refining capacity
2. Investing in strategic petroleum reserves
3. Accelerating the transition to renewable energy
4. Improving public transportation systems
5. Encouraging electric mobility
Diversification of energy sources will help cushion the economy from external shocks.
Conclusion
The turbulence currently shaking global oil supply chains serves as a reminder of how interconnected the world’s energy systems have become. Conflicts thousands of kilometres away can influence fuel prices in Accra within weeks.
For Ghana, managing this vulnerability requires both strategic foresight and structural reforms. Strengthening energy resilience, stabilising the petroleum supply chain, and investing in alternative transport systems will be essential if the country is to shield its economy from the next global oil shock.
In an era where geopolitical events increasingly dictate energy markets, the ability to anticipate and adapt to oil price volatility may well determine the trajectory of Ghana’s economic stability and growth.
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Source:
www.graphic.com.gh