Fuel prices may rise as oil import bill doubles in nine months

 

[Courtesy]

Kenya’s import bill for petroleum products shot up in the first nine months of the year following a rise in crude oil prices in the source markets.

The latest data from the Kenya National Bureau of Statistics (KNBS) shows imports from Kenya’s main source of Murban Crude oil, the United Arab Emirates (UAE), increased by 98 per cent to Sh122.4 billion in September, from Sh61.7 billion in the same period last year.

A big chunk of Kenya’s imports from the UAE (72 per cent) is mainly refined petroleum. Imports from UAE rose the highest compared to other trading partners.

Saudi Arabia, another Kenya’s source of refined petroleum, increased its exports to Kenya by 38.3 per cent to Sh79.4 billion.

In its balance of payment report for the second quarter, KNBS noted that in the first half of 2021, expenditure on imports increased by nearly two fifths - from Sh350.8 billion in the second quarter of 2020 to Sh484.5 billion in the same period in 2021.

“The growth was largely attributable to a marked increase in imports of petroleum products which more than doubled - from Sh30 billion in the second quarter of 2020 to Sh70.2 billion in the second quarter of 2021,” said KNBS.

The State attributed the increase in imports of petroleum products to higher demand for the product, occasioned by easing of travel restrictions imposed to combat the spread of coronavirus disease.

Consumers have over the last few months decried the high cost of petroleum, which is critical in the transport sector and the production of consumer products, including manufactured and agricultural goods.

While the myriad taxes contribute to a big chunk of petroleum products, the surge in the price of crude oil has pushed up the price of petroleum that has been landing at the Port of Mombasa.

Murban oil price rose by 71.3 per cent to $83.20 per barrel on November 25, 2021, compared to $48.57 per barrel on November 26 last year.

The situation is worsened by a weak shilling that has sunk to a record low, trading at Sh112.44 to the US dollar by yesterday. The cost of crude oil and how the local currency is fairing against major world currencies, particularly the greenback, determines the direction of pump prices.

The Energy and Petroleum Regulatory Authority (Epra) recently warned of higher fuel prices when its Director-General Daniel Kiptoo appeared before the National Assembly’s Committee on Finance and National Planning.

“Looking at the trend, we have seen a further spike in international crude oil prices… We will see prices rise, maybe not this month, but in the next two months,” he said.

Mr Kiptoo explained that the energy industry regulator uses crude oil prices of the preceding month – in this case, September – and the initial days of the following month to determine prices for any pricing cycle.

“The prices that we publish are calculated based on the cargo that landed between the 9th of the preceding month and the 10th of the succeeding month,” he told MPs.

A high cost of fuel has been responsible for the recent spike in prices of goods and services with the inflation rate at 6.45 per cent by end of October.