Fuel prices go up in Kenya

May 3, 2010

, NAIROBI, Kenya, May 3 – Fuel prices are set to go up by approximately Sh2.50 per litre effective Tuesday due to what oil marketer KenolKobil term as changes in fundamental factors.

The firm on Monday pointed to the steady rise in the cost of crude oil in the international market from $74.2 per barrel in March to an average of $84.66 at the end of April.

“The cost of Murban Crude Oil, which is the main type of Crude Oil refined at the Mombasa refinery, is posting $86.87 per barrel. The trend in refined products imported into the country has been the same, with Diesel prices climbing from $596.5 per tonne to $690.537. The price of Premium Motor Spirit has climbed from $685 to $778.08 per tonne over the same period,” said a statement from the company.

KenolKobil said despite this significant increase, local pump prices had not been adjusted to match those in the international prices, thus resulting in an under-recovery by marketers over the same period. This therefore necessitated the upward adjustment, they added.

At the same time, Kenol argues that the local industry players have continued to grapple with constantly increasing freight costs, as a result of increased charges by vessel owners due to the increased piracy levels along the East African coastline.

“These freight costs have further been negatively affected by longer voyages that marine vessels now have to take to avoid the coastline as a result of this piracy menace, increasing voyage by up to 10 days with correspondingly increased costs,” the company further said.

The weakening of the local currency against the US dollar is not expected to make the situation any easier for the local firms as this leads to the gradual forex loss, which negatively effect their business as petroleum products are traded in using the US dollar at the international market.

The increased pipeline charges by the Kenya Pipeline Company by Sh0.35 per litre effective April 2010, and ullage constraints at the Port of Mombasa are other factors that continue to hit local pump prices.

Consumers have been urged to brace themselves for high prices going forward since international crude and product prices are projected to remain high.

Kenol’s announcement come barely a month after former Kenya Shell Managing Director Eng Patrick Obath said that Kenyans should not complain about the fuel prices in the market since according to him, they are getting a fair deal.

He had said that the pump price which then was at Sh85 per litre was Sh6 to Sh8 less than the real cost of the commodity.

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