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Households stare at hard times as fuel prices surge

Petrol, diesel and kerosene costs are up Sh5.43, Sh2.24 and Sh2.40 per litre respectively for Nairobi in what is set to have a huge effect on the cost of living

Martin Mwita @MwitaMartin

Kenyans are glaring at tougher economic times ahead as fuel prices go up for the third straight month, adding pressure to the already rising inflation triggered by high cost of food, electricity and non-food commodities.

This outlook emerged yesterday after Energy and Petroleum Regulatory Authority (EPRA) announced higher prices for petroleum products which have been on the rise since March, after a short-lived relief in February.

For the next one month, motorists will have to part with Sh5.43 more for litre of petrol. Those in Nairobi will buy a litre for Sh112.03 up from the Sh106.60 retail price since April 15.

Retail prices across the country are determined after the cost of transportation is factored in.

Price of diesel, which is heavily relied on in the transport sector and driving farm machinery and equipment, has been increased by Sh2.24. This means the product will now retail at Sh104.37 per litre in Nairobi, from Sh102.13 in the last one month.

First choice

Kerosene, which is a first choice for lighting and cooking by poor households will now trade at Sh104.62 per litre in Nairobi, after going up by Sh2.40.

With the latest review, consumers will continue to dig deeper into their pockets with economists cautioning of continued increase in the cost of living.

“Although we have seen short rains, food prices will be affected by cost of fuel. The cost of production is expected to spike,”said David Ngugi, an investment analyst at Cytonn Investment.

Inflation for the month of April rose to 6.58 per cent from 4.35 per cent in March, the highest increase in cost of living in 19 months. Inflation is the rate at which prices increase over time, resulting in a fall in the purchasing value of money.

Many Kenyans are now at the mercy of transporters who are likely to increase public transport fares. Matatu Owners Association (MOA) chairman Simon Kimutai yesterday said transporters will review daily revenues to determine the next move on fares.

Public transport

According to Kimutai, public transport service providers have not increased fares in the last three months despite month-on-month increases on the cost of fuel.

“We don’t have intention of increasing fares but we will review at how the new priceing will impact on our revenues before making a decision,” Kimutai toldBusiness Hub. A jump in fuel prices will see electricity bills go up at a time when the fuel cost levy is at the biggest margin in five years.

EPRA data shows that fuel levy — which is influenced by the share of electricity from diesel generators —rose to Sh3.75 per kilowatt hour (kWh), up from Sh2.75 last month.

The business community has also expressed concerns over the rising costs of fuel, which now adds up to the cost of doing business.

“We are currently undergoing a challenging time which include late payments, a complex licensing regime and multiple taxes. High oil prices mean high cost of doing business which will make us uncompetitive compared to other countries,” said Kiprono Kittony, outgoing Kenya National Chamber of Commerce and Industry president.

Industries use fuel either directly in heating furnaces or indirectly through electricity consumption, where thermal plants use diesel-run generators.

“An increase in the cost of fuel will result in an increase in the cost of transportation as many industries move raw materials and finished goods by road,” said Job Wanjohi, Head of Policy, Research and Advocacy at the Kenya Association of Manufacturers .

“Often, manufacturers are forced to switch to generators during power outages and instability. An increase in the cost of fuel will therefore result in increased cost of energy. This impacts on the unit cost of production especially for high energy consumers,” he added.

Exchange rate

One of the headwinds which is evident in fuel price changes and highlighted in KAM Manufacturing Barometer for Quarter 1, 2019 was the fluctuation of the exchange rate, which has a huge impact on a country heavily dependent on imported crude oil.

This is a twin loss to the country since the cost of oil has increased from $59 (Sh5,965) per barrel in December last year,  to $73 (Sh7,381) per barrel  in April.

“Even if the country doesn’t have any control on the crude oil prices, it would be prudent to ensure stability of the exchange rate,” Wanjohi said.

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