Why Kenyans fail to benefit from low global crude prices

The value of petroleum products imported to Kenya dropped by 10 per cent in the quarter to September compared to a similar period in 2018, following a decline in the global oil prices.

The lower costs are however not translated in a drop in local pump prices as the government institutes new taxes in a bid to increase revenue collection.

The country spent Sh67.7 billion on the different petroleum products imported to Kenya in the three months between July and September, compared to Sh76.7 billion over a similar quarter in 2018.

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The money spent on fuel imports over the quarter is also substantially lower than Sh89 billion that the country spent in the preceding quarter to June 2019.

According to the latest data by the Kenya National Bureau of Statistics (KNBS), petroleum imports accounted for 16.5 per cent of the total import bill during the quarter. Over a similar quarter in 2018, petroleum imports accounted for 18 per cent of the total import bill.

“Imports of petroleum products accounted for 16.5 per cent of the total import bill despite a decline in expenditure from Sh76.7 billion in the third quarter of 2018 to Sh67.7 billion in the corresponding quarter of 2019,” said KNBS in its Quarterly Balance of Payments report.

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Crude oil prices have remained low and last year dropped to a low of $56 (Sh5 677) per barrel in August, coming from a high of $74 (Sh7 502) per barrel in April. During the half year to December, prices have generally remained below $65 (Sh6,589) and only spiked to about $70 (Sh7,096) in January following the tensions between the US and Iran but retreated the following day.

Despite the drop in the global oil prices, local retail cost of petroleum products has remained high, hovering in the region of Sh110 per litre of super petrol in Nairobi throughout last year.

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This is largely due to tax measures implemented over the last two years, which have denied Kenyans the benefit of low global prices.

Among the taxes that have recently been increased are the Import Declaration Fee (IDF) to 3.5 per cent, up from 2 per cent and the Railway Development Levy (RDL) that went up to two per cent from 1.5 per cent that came into effect late last year after the enactment of the Finance Act 2019.

In July last year, the EPRA reviewed upwards the excise duty on petroleum products by 5.17 per cent to cater for annual inflation tax adjustment.

Last year’s taxes are in addition to the value added tax that is levied at eight per cent which came to effect towards the end of 2018.

There have also been additional tax measures on kerosene in the recent past, where the Government has increased excise duty on the fuel to Sh10 from Sh7 and introduced the anti adulteration levy of Sh18 per litre.

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The latter measures were aimed at fighting adulteration of other fuels, whereby unscrupulous dealers would them with kerosene to shore up volumes and sell to unsuspecting motorists.

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PetrolCrude OilKenya National Bureau of Statistics