Premium

Rising cooking gas prices: The worst is yet to come

Cooking gas cylinders dealer in Kibra slums. [Stafford Ondego, Standard]

You are likely to experience more hikes in the cost of cooking gas in the coming months as prices in the global markets continue to go up.

The retail price for Liquefied Petroleum Gas (LPG) has reached an all-time high in recent weeks, but industry players reckon this might not be the end of the rally.

Refilling a 13kg cylinder has gone up to as high as Sh3,500 in some outlets, translating into about a 75 per cent increase over the last year from about Sh2,000 in January 2021.

The previously recorded highest price of cooking was Sh3,275.84 for a 13kg cylinder in December 2011. At the time, the high prices were also driven by the high cost of petroleum products in the international market.

Industry players now say the current situation may escalate as increases in the global prices of LPG continue to reflect in the local retail prices.

LPG price for Saudi Aramco, the largest producer globally, has gone up from an average of $534 (Sh60,876) per tonne in January 2021 to about $800 (Sh91,200) in December, which has since increased further to the current level of $975 (Sh111,150).

By-products of crude oil

In addition to the increase in the global prices of propane and butane, the two by-products of crude oil that produce LPG, local prices have also been pushed up by more taxes. 

The government last year slapped cooking gas with a 16 per cent Value Added Tax (VAT).

This resulted in the first of the many price hikes on the retail price of the fuel that Kenyans have had to grapple with over the last one year.

“We are probably yet to see the worst in as far as the price of cooking gas is concerned,” said Hass Petroleum Group Chief Executive Mr Mohamud Salat.

“Price has been on an upward trajectory, and Kenyans might not have felt the full extent of the increase in retail prices,” he added.

Mr Salat noted that many households are being forced to search for alternatives such as charcoal, but these too are not affordable and are also harmful to human health and the environment.

Kerosene, which has for years been termed the poor man’s cooking and lighting fuel, has also been on the rise, currently retailing at Sh103.54 a litre.

In the five months to February this year, the Energy and Petroleum Regulatory Authority (Epra), had kept fuel pump prices unchanged to cushion consumers until last week when the regulator increased the pump prices for super and diesel.

Charcoal has also remained out of reach for many Kenyans following a 2018 government ban on logging. Both kerosene and charcoal are deemed dirty fuels due to the negative effect they have on human health and the environment.

“People are now spending time and resources looking for alternatives that are also not cheap. It will have a major impact on households as well as the environment,” said Mr Salat.

The higher prices, he noted, could erode the gains that the country has made over the last decade in increasing the adoption of LPG for cooking.

Since 2016, the amount of cooking gas that Kenyans buy has more than doubled, according to data by the Kenya National Bureau of Statistics (KNBS).

Kenyans last year consumed 381,390 metric tonnes of cooking gas, which was an increase of 17 per cent from 326,230 metric tonnes consumed in 2020. This has substantially grown from 151,700 tonnes in 2016, according to KNBS. The proportion of households using cooking gas increased from 4.9 per cent in 2009 to 23.9 per cent in 2019.

The 2019 Kenya Housing and Population Census showed that more than half of the households living in urban areas – 52.9 per cent – rely on LPG.

“LPG consumption grew rapidly from a small base in 2012, and by 2016 consumption in the residential and commercial sector had almost doubled from 2013 levels to about 151,700 metric tonnes,” said Epra in a recent report on consumption of petroleum products.

“The rapid growth in demand continued between 2017-19, with demand nearly doubling again to 304,408 metric tonnes. The Covid-19 pandemic interrupted this trend in 2020, with consumption slightly increasing to 320,909 tonnes.”

The price of LPG is not regulated unlike that of super petrol, diesel and kerosene, meaning prices are left to market forces.

Consumers also miss out on the stabilisation programme that has seen the government spend billions to keep the prices of the three regulated products stable since April last year.

Epra has in the past said there are plans to regulate prices of cooking gas through investments to handle imports.

These include the second Kipevu Oil Terminal that will enable vessels importing gas to discharge fast and with ease while reducing reliance on the privately-owned terminal that is currently in use.

There are also plans to put up storage facilities at the Kenya Petroleum Refineries Ltd (KPRL).

The jetty and storage facility will be common user and will reduce the reliance on privately owned facilities, which has limited the extent to which the government can regulate product pricing.

The Petroleum Ministry has also given the National Oil Corporation of Kenya the mandate to import a third of petroleum products consumed in the country, including LPG.

The State-owned oil marketer has a mandate to stabilise prices of petroleum products in the country and if successful in shipping in these quantities of fuel, it could sell at lower prices compared to other oil firms.

Financial Standard
Premium Inside the Equity-KCB supremacy war
Financial Standard
Premium Economy on a standstill as country headed for elections
Financial Standard
Premium The making of Sh594m fraud: 'We thought we were buying an elephant'
Financial Standard
Premium A dream deferred: How Tullow woes, Covid derailed Jubilee oil export plan