Vehicles line up to fuel up at a petrol station within Nairobi on July 1, 2023. PHOTO | FRANCIS NDERITU | NMG
A drop in global prices to a six-month low has turned the spotlight on the Energy and Petroleum Regulatory Authority (Epra) amid hopes of cost relief for consumers early next year.
Murban crude prices—the benchmark used by the Epra for its monthly pricing cycles—on Thursday remained at $69.6(Sh10,676.28), their lowest since July despite gaining some slight ground from the previous day.
The Murban prices are the lowest in six months, the closest being $69.15 (Sh10,607.73) per barrel posted in June. The fall gives hope of a likely relief at the pump in February next year amid sky-high fuel prices, with a litre of super petrol and diesel retailing at Sh217.36 and Sh203.47, respectively, in Nairobi.
Read: Fuel prices go sky-high in Epra VAT review
A sluggish demand in the US and China on slowed economic activities has been cited as the reason behind the falling crude prices globally.
The continued drop comes weeks after Energy Minister Davies Chirchir warned Kenyans to brace for tougher days ahead on the Israel-Hamas war.
“We can’t do much on international pricing of petroleum. I read an article that international (crude) prices could go to $150 (per barrel) because of the Israel—Hamas war, which would mean our products going to a high of Sh300 per litre at the pump. We hope it doesn’t get there,” he had warned last month.
Supply cuts announced by the Organisation of the Petroleum Exporting Countries (Opec) have further fuelled the drop. Oil prices have fallen by about 10 percent since OPEC and its allies, together called OPEC+, announced a combined 2.2 million barrels per day of voluntary output cuts for the first quarter of next year.
Kenya’s pump pricing schedule lags the global trends by two months meaning that the current drop in crude prices can only be felt locally from February, at the earliest.
Global crude prices remained on a steady climb from July and peaked at $96.9(Sh14,863.81) per barrel posted in September, before starting a decline at the back of the slowing demand in the world’s two biggest economies.
Local pump prices have since September remained above the Sh200 mark per litre of super petrol, diesel, and kerosene since July, on a combination of the doubling of Value Added Tax to 16 percent and the global rally in crude prices.
Fuel prices shot to historic highs in the monthly pricing cycle to November 14 with a litre of super petrol and diesel going for Sh217.36 and Sh205.47 respectively in Nairobi.
The high prices have since forced the government to reinstate the fuel stabilisation fund to prevent prices from breaching the Sh220 mark.
For example, in the current pricing that lapses on Thursday next week, a litre of super petrol would be going for Sh229.37 while diesel would be retailing at Sh223.29.
High pump prices significantly drive up the cost of living given that the Kenyan economy is diesel driven.
Read: Epra faces legal test in fuel price review
Manufacturers of goods, electricity generators, farmers, and service providers factor in the higher costs of fuel when pricing their goods and services.
Inflation — a measure of the cost of living over 12 months — dropped to 6.8 percent last month from 6.9 percent in October.
