Forecasting the Demand for Petroleum Products: A Guide to Long Term National Strategic Planning in Ghana

Forecasting is the process of using the patterns contained in past data to predict future values. Forecasts are numerical estimates of the future levels of sales, demand, inventories costs, imports, exports and prices among others; for a firm, an industry, a sector of the economy, or the total economy. The objective of forecasting is to assist management to plan requirements for marketing efforts, materials, personnel, production, services, capital acquisition, construction and finances. The data for the petroleum products were obtained from National Petroleum Authority (NPA) and that of inflation rates as well as the exchange rates were obtained from Ghana Statistical Service (GSS). The data were analysed using statistical software such as Minitab, Excel or SPSS. The main approach to the analysis was exploratory data analysis. Various techniques in times series such as moving averages, exponential smoothing etc were used to model and forecast the demand for Petroleum Products from 1999 – 2007 and also how inflation, exchange rates, population etc may impact on the economy of Ghana. Two Econometric models were actually developed and comparison with regard to their R2, Adjusted R2, t-statistics were made using non-natural and natural logarithms for the models. Based on the analysis carried out it was found out that, the best model to be used in forecasting was the model without the natural logarithms. Another finding that came to light was that, some of the independent variables were not quite significant which might impact on the demand for the various petroleum products when analysing with respect to the their R2 and t-statistics values. The results of the R2, Adjusted R2, Predicted values clearly again showed that LPG was the petroleum product which was more demanded, followed by the Gasoil etc. The study also revealed that, Inflation, Exchange Rate, Expump Price and Urban Population could affect the demand for the various product and consequently on the Economy of Ghana. From the study, the irregular nature of the variation of the demand for the petroleum products may be attributed to the problem of under production therefore; there is the need to step up production in order to ensure constant supply of the products for economic activities to be pursued.