December fuel prices fail to capture global oil fall

Fuel prices for the Christmas holidays eased by an average of four shillings but failed to address concerns that the easing crude prices are not being passed to the Kenyan consumer.

The Energy Regulatory Commission Sunday announced a Sh4.79 shillings drop in petrol prices to Sh102.01 with diesel prices dropping by Sh3.67 to Sh90.85 as Kerosene dropped by Sh4.94 to Sh71.37 a litre.

Global crude prices have dropped by more than 40 per cent since July from $115 per barrel to an average of $65 a barrel in December.

The ERC director general Joseph Ng’ang’a said that the reason oil prices had not fallen proportionately to that of crude prices is that Kenya ceased to import crude and now imports refined products. An explanation that has not satisfied many.

Mr Ng’ang’a said the country no longer imports crude oil after KPRL ceased refining operations and that local demand is met by importation of refined products.

There is a lag of 30-45 days between placement of the order and actual cargo delivery meaning that prevailing international prices are reflected in the local pumps afterabout.

He added that oil imports are procured in US dollars and are therefore affected by currency movements, but the local currency has remained relatively stable hovering in the 89-90 range in the period in question.

TAXES

The commission explained that only 60 per cent of the refined fuel is affected by price movements while the rest are taxes, levies, amongst other charges.

Global oil prices have been falling due to rising US independence in oil production, failure by Saudi Arabia to cut production and a bleak a economic outlook in Europe and Asia.

Strong US economic recovery data has failed to lift global crude oil prices signifying the sharp drop in the US crude imports and the extent of Europe and China's economic predicaments.

The drop in crude prices is yet to improve Kenya's balance of payments as reflected in the currency which tends to track the commodity overtime.