Pain at the pump as energy regulator adjusts fuel prices

Kenya’s cost of living is expected to rise again following an increase in fuel prices announced yesterday by the Energy Regulatory Commission (ERC).

In its latest monthly review, the ERC increased fuel prices by between Sh1.86 and Sh3.54. Motorists will start feeling the pain at the pump from midnight. In Nairobi, petrol pump prices have gone up by Sh3.54, while diesel is up by Sh1.86. Households using kerosene to cook will pay an extra Sh2.03 per litre of the commodity.

“The average landed cost of imported diesel increased by 2.68 per cent from $566.29 per tonne in March 2015 to $581.49 per tonne in April 2015. Over the same period, the average landed cost of imported kerosene increased by 3.11 per cent from $594.75 per tonne to $613.22, while the average landed cost of imported super petrol increased by 5.17 per cent from $636.26 per tonne to $669.15 per tonne in April 2015,” stated the regulator in a statement by its director general Joseph Ng’ang’a.

An increase in fuel prices affects costs of transport, energy and manufacturing, which have a trickle-down effect on key sectors such as agriculture and industrial production.

The rise in the cost of living is likely to scuttle the country’s growth prospects given that it is a net fuel importer.

Last year, rising insecurity and a sluggish agriculture and manufacturing sectors slowed down Kenya’s economic engine from 5.7 per cent growth in 2013 to 5.3 per cent.

The April inflation figures by Kenya National Bureau of Statistics (KNBS) put the average inflation for households living in the 47 counties at 7.55 per cent, up from 6.88 per cent the previous month and 6.26 per cent in February.

Nairobi’s cost of living measure was, however, within the Central Bank of Kenya’s ceiling of 7.5 per cent since November 2013 when it stood at 7.63 per cent and 6.39 per cent in April.

Subdued prices

In its forecast, National Treasury said oil prices are projected to remain subdued throughout the year due to possibilities of sustained oversupply as Iran and Libya add to the current output following improving political environments.

In the budget summary for 2015/16 tabled in Parliament, National Treasury Cabinet Secretary Henry Rotich said the Government is pegging its economic outlook on an assumption that inflation rates would be maintained within the target of 5 per cent (plus or minus 2.5 per cent) over the medium term.

“Economic growth in Kenya is expected to accelerate, boosted by lower oil prices and higher public and private investment and recovery of the agriculture sector,” Mr Rotich said in his report to Parliament.

The rise comes just days after Energy Regulatory Commission warned oil marketers against hoarding fuel in anticipation of a rise in pump prices terming the move as illegal.

The commission said it had established that one oil firm was behind the shortage of super petrol being experienced in parts of the country.