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Expected revenue from crude oil contained in the mid-year review of the 2015 budget statement has dropped by 24.24%.

Government’s projection remains $52.8 per barrel, but as of yesterday, crude oil price averaged $40 per barrel.

On Monday, oil prices fell more than 6% to fresh 6-1/2-year lows as markets worried about a China-led global economic slowdown that would drastically hit oil consumption at a time of plentiful supply.

Brent oil LCOc1 hit an intraday low of $42.51 a barrel, down 6.5%, or $2.95, from Friday's close. It was down $2.40 at $43.06 a barrel as of 2pm yesterday.

U.S. light crude CLc1 was down $1.93, or 4.8%, at $38.52 a barrel, after falling as low as $37.75, down 6.7% on the previous close and its weakest since February 2009.

Steep losses last week led to the contract's longest weekly losing streak since 1986.

Multi-year lows in oil prices have so far failed to trigger action from the world's top producers to rein in output.

As an oil-exporting country, Ghana faces challenges in how best to manage the budget with declining oil revenues.

Although Ghana is not a major oil-producing country, petroleum revenue had been a key contributor to the Gross Domestic Product (GDP) and a major source of revenue since oil production began in Ghana in 2010.

The fall in crude oil prices from about $110 in March last year to $50 as of April 2015 means that the Ghana’s crude oil import bill has been trimmed by over 60% while its export revenues will drop by almost the same margin.

U.S. crude is now more than 17% below its opening price at the start of the month and Brent is down more than 16%.

Government slashed its 2015 oil revenue forecast to GH₵1.5 billion ($417 million) from GH₵4.2 billion when the budget was presented in November 2014 due to lower crude prices.

The new figure shows 64% drop from the earlier projections.
Although oil production forecast for 2015 remained unchanged at 102,033 barrels per day, government oil revenues - which come from corporate taxes, royalties and its carried interest receipts - would be outsized as firms are hit by the slump in oil prices.
The estimated total petroleum receipts for the 2015 budget amounted to GH¢4.2 billion.

Of the amount, GH¢2.5 billion was allocated as Annual Budget Funding Amount (ABFA) to finance specific programmes in the budget; GH¢1.1 billion was estimated to be transferred into the Ghana Petroleum Fund and GH¢697.7 million to the Ghana Oil Company.

However, based on the revised oil price assumption, revised total petroleum receipts for 2015 are estimated at GH¢1.8 billion (1.3% of GDP), compared with the 2015 Budget estimate of GH¢4.2 billion (3.1% of GDP).

The difference of GH¢2.2 billion is 58% lower than the 2015 Budget target.

In addition to the direct impact on petroleum receipts, the decline in crude oil prices is expected to impact negatively on the Special Petroleum Tax (SPT). Thus revenue yield from the SPT is estimated to be lower by GH¢124.4 million.

The estimate for total expenditure and arrears clearance has also been revised downwards from GH¢41.2 billion to GH¢40.3 billion (30% of GDP). This is mainly on account of lower spending from oil revenues and lower domestic interest payments.

Both demand and supply factors have played a critical role.

Overall, the three things that made the biggest different include an increase in oil production by non-oil producing (OPEC) countries through the use of an economically viable technology called hydraulic fracturing, appreciation of the US dollar and the decision by OPEC to maintain production levels.

In addition, more than 10% appreciation of the US dollar has led to a weaker demand in importing countries.

Instead of cutting production to drive oil prices up, OPEC has kept production stable.