Adding fuel to the raging fuel price debate

Since the world market price of crude oil began its downward trend six months ago, there have been calls on government to reduce the retail prices of petroleum products.

The Energy Regulatory Commission has been recalcitrant. Even when the drop came it was in cents.

It is telling that the Central Bank of Kenya does not bother to manufacture cents, therefore the hitherto drops have been, to put is conservatively, useless.

This has been the trend until mid this month when ERC ‘shocked’ all of us and sliced nearly ten shillings off the price of fuel per litre.

In the latest review by the ERC which runs until February 14, a litre of super petrol in Nairobi is retailing at Sh92.88 after shedding off Sh9.13.

Diesel in the capital city has dropped by Sh7.50 to retail at Sh83.35 while kerosene decreased by Sh5.78 to sell at Sh65.59.
The prices is lowest in Mombasa where a litre of super petrol will trade at Sh89.57, diesel at Sh80.06 and kerosene at Sh62.84.

I’m no economist but just a concerned consumer.
If you think the ERC is doing well in price reductions compare their counterparts.

In India in December 2014, petrol in Delhi was costing Sh89 (Rs 61.33) a litre, the lowest in 44 months. Diesel cost Sh73.50 (Rs 50.51) a litre, the lowest since July 2013.

In January this year, Delhi residents are paying Sh 85.75 (Rs 58.91) for litre of petrol.

Similarly, diesel is flowing for as little as Sh70 (Rs 48.26) a litre in Delhi, the lowest since April 2013. In South Africa, the Department of Energy announced early this month a price cut of nearly one rand.

Currently South Africans are buying petrol for approximately Sh84.

In the United Kingdom, where the market is liberalised, prices of unleaded petrol at the pump have seen an average of 15.8 per cent price reduction since July 2014.

By then,  unleaded petrol was 131.5 pence per litre but has come down to 110.7 pence per litre, a reduction of 20.8 pence per litre.

Taking into account that one pound equals to 100 pence, then the import is that the Brits are paying  Sh158 per litre, having benefited from a price reduction of a whopping Sh27 per litre.

Wait! Before you scream murder, please bear in mind that your British counterpart is earning possibly five times more than you do here in Kenya! So who is paying more for fuel?

There is no doubt that successive governments have taken Kenyans for a ride when it comes to the price of petroleum products.

This is due to two main factors. The state has a monopoly in the market and demand for petroleum products is almost inelastic as the products are everyday necessity whether one owns a vehicle or not.

Other reasons include the fact that the pricing of petroleum products is shrouded in secrecy with governments claiming they spend millions to subsidise petroleum products, coupled with a weak and unstable local currency, among other explanations though consumers see them as excuses.

That is why the retail price of petroleum products in Kenya bears no resemblance to the world crude oil market prices.

The crude oil prices have fallen by over 50 per cent in the six months or so, ‘fuelconomics’ aside show me an equivalence of 50 per cent drop in pump prices!

Twitter: @tonyngare