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Fuel prices, Covid-19 and economic laws

By XN Iraki | Dec 30th 2020 | 2 min read
By XN Iraki | December 30th 2020

The trip from Ruiru, next to GSU Garrisons to Kiamwangi in Gatundu costs you Sh150. That is a distance of only 19km. That is not cheap by any standards. A trip from Ongata Rongai to the CBD costs the same at peak hours. Why has bus fare gone up so much?  

There are two plausible reasons. The number of Saccos operating on these routes could be too few to bring the forces of the market into play. Should regulators bring in more Saccos to ply a route that has high fares? Do we need adverts like ‘more matatu Saccos needed’, or can we forcibly break up big matatu Saccos?

The high bus fares could also be a result of coronavirus. When the number of occupants in a matatu was cut down, the operators raised the bus fare to cater for lost revenue. They could no longer benefit from economies of scale.

High bus fare is a silent plague among the hustlers. It could surprisingly have played a big role in reducing movement and spread of Covid-19. It seems economics came to the aid of government efforts to reduce spread of Covid-19.

Here is another school of thought. Is the government sneakily increasing the fuel prices to raise fares and consequently reduce spread of Covid-19?

If that’s the plan during the festive season, then it is a smart one. Seems heartless, but instead of imposing a curfew, just raise fuel prices. Bus fares go up, many stay home and the spread is curbed. We can then adjust the prices downward after the festive season.

Using the laws of economics, we can discourage “bad behaviour” but we must be wary of unintended consequences like making it hard for hustlers to travel. Some have resorted to walking, injecting inefficiency into the economic system. It’s also possible that boda boda operators will get lots of work as their fares closely match thos of matatus.  

Just thinking out loud; Would raising beer prices during this festive season also reduce rampant drinking? Yes it would. But it could also shift consumers to illicit brews. Remember the proposal to raise the minimum beer bottle size to 750ml? 

It seems Covid-19 did not distort the laws of economics. It just made them more apparent, particularly to hustlers. Remember that as you make merry.

Covid 19 Time Series


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