Why fuel prices have shot up

Two Days after a Nation spot check revealed an increase in petrol pump price, Kenol Kobil on Wednesday moved to explain the reasons behind it.

The oil marketer said that several issues in the industry had forced them to readjust their prices to match market conditions.

In a statement to newsrooms, the firm warned customers to expected further increases in pump prices soon.

“Since the beginning of the year, the prices of crude oil and refined products in the international market have defied the downward trend that had characterised the second half of 2008.

View to do that

This is mainly due to the decision to cut down on production by oil producing countries,” read a statement from the company.

Already, Kenol-Kobil alongside Total and Oilibya had effected the Sh2 price increase of unleaded premium petrol and low-sulphur diesel last week.

In some of the stations visited by the Daily Nation, unleaded petrol sold at Sh76.90 and diesel at Sh71.90 per litre compared to Sh74.90 and Sh69.90 respectively two weeks ago.

Other players among them National Oil and Shell Kenya are yet to affect the changes if at all it is an industry view to do that.

According to Kenol, the long standing weak exchange rate position of the domestic currency had also played a role in the price change.

“The shilling has held very weakly against the dollar and is currently pegged at over Sh80 to the US Dollar. This means that gains realised when international prices came lower have been swallowed to a certain extend,” added the statement signed by Isaac Gachuriah, the assistant general manager.

The new round of price increases is expected to keep the inflation rate in the country up.

A general upsurge in the cost of living might also follow as motorists and consumers brace for the tough times ahead.

“We are, however, doing all within our means to minimise upward price adjustments, but our advice to all consumers is to embrace for a price increase while exploring immediate reduction in usage of oil, as and when possible,” explained Mr Gachuriah.

Meanwhile, oil price fell by over a dollar towards $48 a barrel yesterday adding to Tuesday’s 3.7 per cent loss on falls for equities and after weekly data showed US crude inventories up far more than expected.

Analyst forecast

Crude oil stockpiles rose by 6.9 million barrels last week, the American Petroleum Institute (API) said late on Tuesday, far exceeding analyst forecasts for a 2.1-million-barrel build and sending prices sharply down in electronic trading.

The market has lost 6.6 per cent over the past three sessions, also dragged down by stock markets that are taking a hammering at the start of what is expected to be a grim earnings season.