Higher diesel price to hurt consumers

Trucks transporting containers and other cargo from Mombasa County to different destinations (PHOTO: Kelvin Karani)

The cost of transport is set to rise following an increase in the retail prices of diesel, a fuel critical to different economic sectors, and with direct impact on the pricing of consumer goods.

Diesel pump price will this morning go up by Sh4.57 per litre to Sh96.40 in Nairobi, according to monthly guidelines issued by the industry regulator yesterday.

Also increased is the price for kerosene, largely used by poor households for lighting and cooking, which will for the next month retail at Sh87.12 in Nairobi, Sh3.57 higher.

The price of super petrol also went up, albeit marginally by 17 cents to Sh106.99.

Cost of crude

The Energy and Petroleum Regulatory Authority (Epra) attributed the hike to an increase in the cost of crude oil.

“Taking into account the weighted average cost of imported refined petroleum products, the changes in the maximum allowed petroleum pump prices in Nairobi are as follows: super petrol, diesel and kerosene increase by Sh0.17, Sh4.57 and Sh3.56 per litre respectively,” said Acting Director General Daniel Kiptoo in a statement.

“The changes in this month’s prices are as a consequence of the average landed cost of imported super petrol increasing by 1.51 per cent (in December 2020 compared to November 2020)… diesel increasing by 13.05 per cent…and kerosene increasing by 9.27 per cent.”

Epra noted that crude oil in December averaged $49.57 (Sh5,450) per barrel, substantially higher than $43 (Sh4,730) in November.

Much of the stock of petroleum products that will be used for the next 30 days was acquired in December and early this month.

Oil prices have been recovering following a crash early last year resulting from the outbreak of Covid-19 and the subsequent slowdown in economies.

Crude oil averaged $17.64 (Sh1,870) per barrel in April 2020, down from $67 (Sh6,700) in January.

The price has however been on the rise with Murban crude oil trading at $56.52 (Sh6,160) mid this week, the highest since February last year.

The weakening of the local currency against the dollar also contributed to higher retail prices.

The exchange rate between the two currencies is always factored in when determining the fuel retail prices, helping petroleum products importers recoup exchange losses they may have incurred.

It stood at Sh100.97 to the dollar on average in January 2020, weakening to touch historical lows of about Sh110 in December.

As retail prices of fuel continue to rise, the high rate of taxation of petroleum – at about 50 per cent of pump price – as well as planned price stabilisation mechanisms, will come into focus.

This includes the Petroleum Development Levy (PDL) that went up to Sh5.40 per litre from 40 cents.

On hiking the levy, the Energy ministry said the money raised would be used in subsidising retail cost of diesel in case the cost of crude oil rose past $50 per barrel.

It might, however, take a while before motorists and industries can experience relief through subsidised pump prices as the ministry is yet to issue regulations, which would enable it to withdraw money from the PDL fund.

Regulations will also be needed to prescribe how the funds would be used, as well as the threshold at which the subsidy should kick in, with the $50 price for crude oil having been a verbal declaration.