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Cost of Living to Worsen as Fuel Prices Increase

Fuel prices go up sparking fears of worsening cost of living in Ghana, at a time that OPEC+ is cutting oil production.

The cost of living in Ghana is expected to worsen following a fresh hike in petroleum prices. This development comes just days after the Public Utilities Regulatory Commission (PURC) announced utility tariff increases starting July 1.

Fuel price hikes typically lead to increased costs for goods and services, particularly those that depend on haulage trucks for transportation. Some oil marketing companies have already adjusted their prices: Shell is now selling a litre of petrol and diesel at GH₵14.84, while GOIL has increased its petrol price to GH₵14.60 from GH₵14.55, and its diesel price to GH₵14.75 from GH₵14.70.

The latest increase in petroleum products is primarily due to an upward adjustment in the Unified Petroleum Price Fund (UPPF) margin, following a directive by the National Petroleum Authority (NPA) to increase the margin from June 1, 2024. More oil marketing firms are expected to follow suit and raise their pump prices.

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Market observers are questioning the rationale behind the NPA directive, which has denied consumers some relief despite a drop in global crude oil prices. Additionally, there are concerns that the global price of crude oil may rise in the coming months as oil producers cut production.

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The Organization of the Petroleum Exporting Countries and its allies, including Russia (OPEC+), agreed on Sunday to extend most of their deep oil output cuts well into 2025. This move aims to stabilise the market amid slow demand growth, high interest rates, and increased production by the United States.

Recently, Brent crude oil prices have been trading near $80 per barrel, below what many OPEC+ members need to balance their budgets. Concerns over slow demand growth in China, a major oil importer, and rising oil stocks in developed economies have also weighed on prices.

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Currently, OPEC+ members are cutting output by a total of 5.86 million barrels per day (bpd), or about 5.7% of global demand. This includes 3.66 million bpd of cuts set to expire at the end of 2024, and voluntary cuts by eight members totaling 2.2 million bpd, expiring at the end of June 2024.

However, on Sunday, OPEC+ agreed to extend the 3.66 million bpd cuts by a year until the end of 2025 and prolong the 2.2 million bpd cuts by three months until the end of September 2024. This decision has sparked fears that global crude prices might increase, denying consumers in Ghana any chance of enjoying price reductions in the near future.

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