Public Interest & Accountability
Committee

PIAC Forum

Should the formula for estimating Benchmark Revenue be reviewed?
By PIAC   Posted date: 20th January 2016

Benchmark revenue is a product of benchmark price and benchmark quantity. Benchmark Price is a seven (7) year moving average of actual and expected oil prices (Brent), four years before current financial year, the current year and two years forecast after the current financial year. Benchmark Output is a three (3) year moving average of government take of the crude oil constituting the year before, the current and one year after the current year.

The logic is to smoothen petroleum price volatilities and create more savings by budgeting with lower prices and getting higher returns. A major challenge with the benchmark revenue was observed to be that the mechanised moving average works perfectly in smoothening price volatilities but very poorly for consistently lower prices as is currently being experienced. Should government continue to apply this formula in wake of falling oil prices? What other challenges do you envisage with the continuous application of this formula? Is the estimation process transparent enough?

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 Reader Comments
Submitted by Dengyeyir, 04:03 March 2nd
The formula should be reviewed to ensure realistic estimates regardless of movement in petroleum prices. A consultative meeting of expert should be convened by the MoFEP to develop a formula for approval by Parliament

 

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