Kenyans told to brace for higher fuel prices

April 6, 2012
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Vehicle queue at a petrol station in Nairobi/ FILE
NAIROBI, Kenya, Apr 6 – Kenyans have been warned to expect a high jump in fuel price increment during the next review by the Energy Regulatory Commission (ERC) to caused by significant increase in the cost of international crude oil in the last month.

According to documents seen by Capital FM Business, Free on Board prices for unleaded premium were up 7.75 percent on average from $1057.67 per Metric Tonne (MT) to $1139.60.

“That of the aviation jet fuel and jet kero (kerosene) were on average up 2.92 percent from $1,047.25 per MT to $1,074.26 per MT and 2.84 percent to $1068.40 respectively,” the report shows.

Free on Board prices for Murban crude lifted in March 2012 saw an increase of 5.44 percent from $120.45 per barrel (to $127) for crude lifted in February.

Murban crude accounts for over 90 percent of the country’s crude imports and therefore has a direct impact on the local retail prices.

A litre of super petrol has been retailing at Sh111.69 since March 15 after going up by 37 cents. The price will hold until April 14 when the regulator is expected to announce the new prices.

It is however worth pointing out that ERC price caps take into consideration many determining factors including cost of the products and other incurred costs and also looks at the average price of crude oil in the last two months. The exchange rate is also a factor.

Genghis Capital Research Analyst Evans Mugi however explains that although the shilling has been stable in March, it is unlikely to lessen the direct hit on Kenyan motorists.

The local unit strengthened by 0.40 percent against in the dollar between February and March from an average of 83.10 in February to 82.80 the following month.

“The reason why we think fuel prices will go up is because of the two inputs that are critical in determining the price of fuel which is a raw material that’s gone up by about 4.8 percent. At the same the Kenya shilling relative to the US Dollar has strengthen by a margin of 0.40 percent so the pull factors are more that the push factors and we get the feeling that fuel prices are going to go up in the next fixing,” Mugi predicted.

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