Kenyans Face Hardship as Saudi Arabia Slashes Oil Exports
The decision by Saudi Arabia and Russia to reduce oil production by 1 million and 500,000 barrels per day, respectively, has sent shockwaves through the international energy landscape and sparked fears of a market shortage.
On Tuesday, July 4, economic experts cautioned that the ripple effect could be greater than anticipated, including an immediate rise in oil prices.
A few days after the Energy and Petroleum Regulatory Authority (EPRA) revised fuel prices upwards by the 16% VAT on petroleum products, the news sparked fears in Kenya that the price of fuel could increase even further.
GossipA2Z consulted economists and analysts to explain the potential impact of Saudi Arabia and Russia’s most recent action on Kenya’s fuel prices.
The central question was whether the major developments would increase the current price of a liter of petrol, which is Ksh195.53.
Prof. XN Iraki, a renowned economist, and analyst, remarked that while Saudi Arabia and Russia’s decision would affect the global market, it was uncertain whether Kenya would feel the effects.
“We must examine the global market to determine whether non-Organization of Petroleum Exporting Countries (OPEC) nations will produce more oil to make up for the shortfall,” he explained.
Iraki stated that fuel prices would increase substantially if non-OPEC nations failed to cover the deficit.
In such a scenario, Iraki disclosed that Kenya’s current import contract with Middle Eastern oil giants Aramco, National Oil Corporation Global Trading (ADNOC), and Emirate’s National Oil Company (NOC) could save the country from high prices.
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Davis Chirchir, the Energy and Petroleum Cabinet Secretary, explained in March 2023 that the dollar would not determine fuel prices in the country because the government would purchase petroleum products in Kenyan shillings through a six-month credit system.
Sam Okumu, an economist, added that the current high prices have reduced fuel demand, and importers are unlikely to raise prices further.
Our oil market is driven by global market forces, so if demand is high but supply is low, prices are anticipated to increase.
“Our consolation is that current prices have reduced demand. People are searching for alternatives to fossil fuels, he explained, so oil importers in Kenya are extremely unlikely to raise prices.
President William Ruto announced on Thursday, June 1 that his administration is working toward reducing the nation’s reliance on fossil fuels.
The President stated that the introduction of electric motorcycles for boda-boda drivers is essential for the adoption of renewable energy.
Ruto stated at the time, “We are developing, and by September we will have a mechanism where you can obtain a boda-boda that does not require gasoline, is powered by electricity, and is not financed by a predatory system.”
Kenyans Face Hardship as Saudi Arabia Slashes Oil Exports
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