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A litre of super petrol will retail at Sh122.81 in Nairobi

BUSINESS NEWS
By Dominic Omondi | March 15th 2021

Motorists will have to dig deeper into their pockets at the pump station.[File, picture]

The pain at the pump will only get sharper for motorists following yet another major hike in prices of petroleum products for the second month in a row that is likely to push the cost of living.

A litre of super petrol will retail at Sh122.81 in Nairobi in the next 30 days - an increase of Sh7.61, the latest wholesale and retail prices of petroleum products by the Energy and Petroleum Regulatory Authority (Epra) shows.

[Graphics, Standard]

Meanwhile, the opposition party, Orange Democratic Movement (ODM),  opposed the latest price increase saying the hike in fuel prices was shocking and could drive a revolution against the government and its economic policies.

It now wants the government to rescind its decision, adding that heaping more taxes would only hurt the economy. “Silence on our part at this time will amount to complicity, and we therefore unequivocally state that we are opposed to this increase in the price of fuel. We demand that this decree is rescinded before it becomes effective,” ODM said yesterday in an immediate rejoinder to  new fuel pricing.

This means in two months, a litre of super petrol has risen by Sh15.80 in what is likely to hit hard majority of motorists on the road whose cars run the fuel.

A litre of diesel, which went up by Sh5.75, will be retailing at Sh107.66 between March 15 and April 14 in the country’s capital city. Last month, a unit of diesel went up by Sh5.51. Kerosene, which is popular among the poor households for lighting and cooking, will retail at Sh97.85 per litre, its price having been increased by Sh5.41.

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A litre of Kerosene has now increased by Sh11.13, a tall order for the majority of poor families that rely on paraffin to light their homes and cook their food.

Epra attributed the jump in pump prices to the rally in the global costs of oil with the Murban crude oil docking at the port of Mombasa at $61.61 (Sh6,715) per barrel in February 2021 up from $55.27 (Sh6,024) in January.

Factors considered in the computation of retail prices, according to Epra, included the eight per cent Valued Added Tax (VAT) as well as revised rates of excise duty adjusted for the increase in prices of goods and services.

“The changes in this month’s pricing are as a consequence of the average landed cost of the imported super petrol increasing by 14.97 per cent - from $391.24 (Sh42,645) per cubic metre in January 2021 to $449.82 (Sh49,030),” said Epra acting Director General Daniel Kiptoo Bargoria in a statement.

Diesel, commonly used by heavy machinery in manufacturing and agriculture, increased by 12.29 per cent from Sh41,525 ($377.55) per cubic metre to Sh49,940 ($423.95) per cubic metre. Kerosene increased by 13.26 per cent from Sh38,170 ($347.19) per cubic metre to Sh43,255 ($393.23) per cubic metre.

The landing cost was at its lowest point in May at the height of the pandemic as demand for oil slumped following lockdowns and other social distance rules aimed at curbing the spread of the Covid-19 disease.

A faster increase in the landed cost of crude oil cancelled out the little benefit that the country would have enjoyed with a slight appreciation of the Shilling against the dollar.

Legally, prices of petroleum products are capped to protect consumers.

Taxes, which constitute almost half of the price of petroleum products in Kenya, have increased by almost a third from April 2020, with the State increasingly relying on fuel to fill its coffers as it moves to finance its budget against poor economic performance.

In its latest budget proposals, most of the upward adjustments that Treasury made in the final Budget Policy Statement for 2021 came from ministerial appropriations-in-aid or fees and fines charged by State corporations.

A big chunk of additional fees will be paid by motorists after the State revised the Petroleum Development Levy rate from 40 cents per litre to Sh5.4 per litre.

In the transport sector, which takes up close to a tenth of Kenyan consumer’s expenditure, prices have been inflated by 16.73 per cent year-to-February. This is partly due to the social distance rules that require public service vehicles to carry half their capacity.

But soon, the increase in prices of fuel will begin to reflect in the transport cost.

The cost of housing, water, electricity, gas, and other fuels, where petroleum products play an integral, has also been increasing as demand for crude oil builds up.

After a prolonged drought, the country’s mix of electricity is likely to incline more towards thermal energy which uses diesel. And with the increase in the price of diesel, the cost of electricity is also likely to go up.  

And things could get even worse for Kenyans as the government reviews pricing of petroleum products.

The Petroleum Ministry in new draft regulations has increased the cost components factored when computing the retail cost of diesel, super petrol and kerosene. In the proposed formula, motorists will incur new levies such as inventory financing costs, which are expected to help oil marketing firms access working capital.

Other components include jetty handling costs that will be passed on to entities that facilitate the unloading of petroleum products from ship tankers, most of which are State-owned.

The newly proposed charges are likely to affect economy, with the cost of fuel products having a direct impact on transport, manufacturing and power production.

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