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According to ABC Capital Research Analyst Joshua Otiende, local factors will reduce the margin by which the drop is expected in Kenya/FILE

Kenya

Factors that will keep fuel prices high despite global drop

According to ABC Capital Research Analyst Joshua Otiende, local factors will reduce the margin by which the drop is expected in Kenya/FILE

According to ABC Capital Research Analyst Joshua Otiende, local factors will reduce the margin by which the drop is expected in Kenya/FILE

NAIROBI, Kenya, Jan 13 – International crude oil prices fell below 30 dollars a barrel for the first time since December 2003 on Tuesday, but Kenyan motorists have been cautioned that the trickledown effect may take a while longer to be felt.

The latest prices have crude oil down 19 percent this year alone and a 72 percent plunge from crude oil’s June 2014 peak of almost $108.

According to ABC Capital Research Analyst Joshua Otiende, local factors will reduce the margin by which the drop is expected in Kenya.

These include the rate of supply, cost of importation owing to the depreciation of the shilling and the Sh3 per litre fuel levy that was introduced in 2015.

“Another factor would be the cycle of supply, for example fuel that is being sold in the market now, might have been imported in November. My suspicion is that we are pricing fuel that was imported say in December or in January; in that case we expect the prices to remain as they are or drop slightly,” Otiende told Capital FM Business.

He predicts the oil prices to stabilise on $30 a barrel or go lower to $20 as supply exceeds demand in the international market.

“Generally we expect a stable price as well as a drop in the prices throughout 2016, which will in turn benefit the manufacturers as it will reduce the cost of doing business. However, a high interest rate regime and the volatility in the exchange rate will mitigate the cost,” Otiende observes.

In the last oil prices review by the Energy Regulatory Commission saw Super petrol retail at Sh0.40 lower, diesel at Sh1.15 less, and kerosene Sh1.54 less for a litre of each compared to the previous month.

Consumers in Nairobi have been paying Sh90.06, Sh78.51 and Sh53.27 respectively for super, diesel and kerosene. New prices will be announced on Thursday, January 14.

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