More agony as fuel prices hiked again

November 14, 2011 2:47 pm


A petrol station attendant fuels a vehicle in Nairobi/FILE
NAIROBI, Kenya, Nov 14 – Despite relative stability in international fuel prices, motorists will be required to fork out more for a litre of fuel after price adjustments by the Energy Regulatory Commission capped the maximum pump price in Nairobi at Sh124.13 for super petrol for the next one month, a jump of Sh3.63.

This comes at a time the general cost of living has been rising with inflation touching a high of 18.6 percent in October, with the recent hike in pump prices expected to add to this pressure.

On Monday, the ERC put down the recent price hike to a weakening shilling from an import price of Sh96.68 in September to Sh101.96 in October during the time of importing.

However of interest, was the ERC’s decision to factor in operating expenses for oil marketers owing to higher financing costs as banks respond to the Central Bank’s move to raise its base lending rate which has seen a spike in interest rates.

“Over the recent past, the cost of financing has increased substantially. Taking this into account the commission factored in Sh0.62 cents in the operating costs. We however maintained a lower margin for kerosene at Sh2,” ERC Director General Kaburu Mwirichia said.

These factors, he says, wiped out the benefits that could have been accrued from reduced international crude oil and import prices.

Following the hikes, diesel within the city will for the next one month retail at Sh114.30 while kerosene will retail at Sh94.87.

During the period, the average landed price for super petrol decreased by 0.15 percent to $1071.07 per metric ton while that of diesel increased by 0.5 percent to $982.88. The landed price for kerosene also decreased by 0.17 percent to 1031.61 per metric ton.

In November, the CBK raised its benchmark lending rate by 550 basis points to 16.5 percent after it had in September raised the same rate by seven percent sparking of a round of lending rate adjustments by banks.

This is the 11th month in a row that the pump prices have been edging up, since the introduction of the price control formula geared at protecting consumers from oil marketers as well as capping their profit margins.

The Parliamentary Committee on Energy is working on a proposal to change the formula to have fuel prices reviewed on a quarterly basis rather than monthly.

Mwirichia however said such a move would be counter productive, arguing that one month was better of capturing the changes in the market more effectively.

“One month is good because if you take the rapid changes in the international crude prices two months or three months will not capture all the changes,” Mwirichia said.

Mandera will have the highest pump prices in Kenya with super petrol retailing at Sh136.40, diesel Sh126.82 and kerosene Sh107.39. prices in Mombasa will be the lowest with super petrol retailing at Sh120.85 and diesel Sh111.04.

Many blame the rising fuel prices locally to the ‘price controls’ that were introduce by the government in December 2010.

Energy Minister Kiraitu Murungi has however ruled out scrapping of the formula on price control arguing it remained an important tool for the government to monitor oil prices in the market, instead directing the ERC to review the formula.

Mwirichia was however confident that with stabilizing international prices and the strengthening of the shilling, Kenyans should expect pump prices to start coming down from December.

“What goes up will eventually come down. If things hold in November in terms of international prices and exchange rates we foresee a reduction in the pump prices,” he said.


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