Renewed inflationary fears as fuel prices go up

By Morris Aron

The Energy Regulatory Commission has revised fuel pump prices upwards, a move that may herald a reversal in inflation trends that for the last three months has been dropping.

Petrol prices in Nairobi increased by Sh2.47 per litre, diesel increased by Sh3.99 per litre, while kerosene rose by the highest margin of Sh5.68 per litre. ERC said that the change in pricing was due to an increase in international oil prices.

“There has been an upward trend in the price of crude and refined products in the international markets over the last three months and this is the cause of the upward adjustments of retail pump prices,” said ERC Director-General Kaburu Mwirichia in a statement.

Following the announcement, prices in Nairobi will retail at Sh108.95 per litre of super petrol, Sh01.07 per litre of litre of diesel and Sh79.65 per litre of kerosene. In Mombasa, the prices will change to Sh105.70, Sh97.84 and Sh76.87 per litre of petrol, diesel and kerosene respectively.

ERC said the average landed cost of imported super petrol increased by 2.76 per cent, from $997.52 (Sh 84,157) per tonne in July to $1025.05 (Sh86, 458) per tonne in August. Over the same period, the average landed cost of imported diesel increased by 6.90 per cent from $933.35 (Sh78, 730 to $997.78 (Sh84, 160) per tonne while for kerosene went up the most by 10.19 percent to $1022.98 per tonne.

While the average landed cost of oil increased, the mean exchange rate of the local unit against the dollar remained almost unchanged at 0.006 per cent to Sh84.06 to the dollar in September compared to Sh84.11 to the dollar in August.

Analysts say that the rise in fuel prices is bound to be greater next month as oil prices in the international markets have assumed an upward trend in the last one and a half months. 

The renewed increase in fuel prices could reverse inflation trends, which fell for the ninth straight month in August to 6.09 per cent.

The price adjustments comes after a top official at ERC earlier in the week warned that the “cost of credit” surcharge will be introduced during this month’s retail price review for kerosene, diesel and petrol with a possibility of marginally pushing up prices.

The new charges bring to Sh10 the overall margin enjoyed by fuel marketers while cover for financing rises to Sh1.00. Energy minister Kiraitu Murungi gazetted the surcharge last week.