Drop in fuel prices likely in coming months

August 15, 2011
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, NAIROBI, Kenya, Aug 15 – A day after the Energy Regulatory Commission announced a Sh1.28 increase in super petrol prices, the regulator is hopeful that pump prices will drop in coming months.

Director General Eng Kaburu Mwirichia told Capital Business that international crude prices have been on the decline, and should this trend continue supported by a stable Kenyan shilling, then the benefits would be reflected at the pump stations.

“Since June, the (international) prices have been quite unstable but going forward, it looks like in the month of August international prices are a bit down compared to July and so we are hopeful that next time round, we should expect some reductions,” he projected.

The prices of super petrol and diesel in July were quoted at $1,097.83 and $1,002.67 respectively which were a marginal decline (0.1 percent and 0.4 percent) over the previous months.

However, this was grossly offset by the weakening shilling which lost 1.4 percent of its value between June and July and which has overall deteriorated by approximately 17 percent in the last few months.

But the DG was quick to point out that although fuel prices have been on the rise since the beginning of the year, the rate at which they have been going up has been marginal.

For instance, the prices went up by an average of Sh2.41 in Nairobi in the February/March fuel adjustment review compared to the 42 cents announced for the July/August period and the Sh1.28 reported on Sunday.

This has not stopped motorists from complaining about the high cost of fuel which Eng Mwirichia attributed to slight increase in the procurement costs for both crude and refined products as well as the depreciating local currency.

The urban poor and those in the low income segment that depend on kerosene for cooking and lighting have no reprieve either as the cost of kerosene has also been on the upward trajectory.

Kerosene will in the next one month retail at Sh88.96 per litre in Nairobi which is a Sh2.80 hike over July/August period when the prices had also gone up by Sh2.45 over the previous month’s.

Although the rise is in reflection of the increase in the international market, it threatens to negate the government’s efforts to cushion the poor through the removal of all taxes on the commodity and the capping of profit margin on it to Sh4 per litre.

ERC still believes that the current amount is favourable because without it, the cost per litre would be more than Sh7 higher.

In spite of the new rates, the regulator continues to encourage the oil marketers to retail their products below the set prices thereby giving value for money to their customers.

KenolKobil had recently aired a promotion offering Sh2 discounts per litre on certain days.

Although it’s been lauded for this initiative, the government has been unhappy with its continued insistence to predict fuel prices a few days before the new rates are announced by the regulator.

The Central Bank of Kenya is said to have written to the marketer warning it to desist from such behaviours as they were causing panic and encouraging others to hoard the products which distorts the market.

Asked whether the regulator would take any action on culpable firms, Eng Mwirichia only reiterated their appeal to such marketing companies to stop issuing speculative price announcements.

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