Why Fuel Prices Are Poised for Yet Another Hike
As a result of international agencies lifting the veil on diminishing oil inventories worldwide, Kenyans can expect another rise in fuel prices in the coming months.
According to the international news agency Reuters, the dwindling supply is causing an imbalance in the law of supply and demand.
In some states, crude oil demand has already exceeded supply, resulting in a shortage.
In the future months, economists expect the price of crude oil to increase from Ksh11,978 per barrel to Ksh12,834 as a result of the reduction in inventories.
The shortage resulted from Saudi Arabia’s decision to drastically reduce its crude production. This is important because the Gulf nation is the chief of the Organization of the Petroleum Exporting Countries (OPEC).
Beginning in July, both Saudi Arabia and Russia announced plans to reduce crude exports to increase per-barrel prices.
Particularly, Saudi Arabia announced that it would reduce production by up to 1 million barrels per day during July and August, bringing daily production to 9 million barrels.
Russia, on the other hand, was on track to reduce production by over 500,000 barrels per day in August.
The decision was made less than a month after President William Ruto increased the Value-Added Tax (VAT) from 8% to 16%, causing petroleum prices in Kenya to steadily rise.
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Super Petrol increased by Ksh13.49 to retail at Ksh195.53 per liter on 1 July, while Diesel increased by Ksh12.39 to Ksh179.67 per liter. On the other hand, kerosene costs Ksh173.44.
The Energy and Petroleum Regulatory Authority (EPRA) is likely to reevaluate its pricing, which may exceed Ksh200 if prices increase.
Commuters who use public transportation are already feeling the squeeze as matatu fares continue to rise. The Kenya National Bureau of Statistics (KNBS) reported a 40 percent increase in tariffs between July 2022 and July 2023.
After President William Ruto’s administration negotiated an oil agreement with Gulf states in April, EPRA was unable to predict whether oil prices would decline.
“As to whether we will receive a cost reduction reprieve. Because this is a global retailing commodity, we have no control over it. EPRA Director General Daniel Kiptoo told a parliamentary committee at the time, “I want to assure you that we will continue to work on efficiencies to ensure that Kenyans receive a reprieve going forward.”
“If there is a profit, we as regulators will be able to distribute it to ordinary mwananchi. In the event of a loss, the expense will be carried on to the consumer.”
Since then, prices have steadily increased.
Why Fuel Prices Are Poised for Yet Another Hike
