Money Markets
Crude oil prices to send cost of petrol soaring
Motorists and consumers should brace themselves for tough times as petrol prices are set to sour past Sh90 a litre next month. Photo/FILE
Petrol prices are set to rise past Sh90 a litre in the run-up to Christmas as oil marketers factor in rising crude oil prices at the pump.
The prices represent a 20 per cent rise since August and will be the highest since December, 2008 — piling pressure on inflation due to rising costs of transport and other goods and services that rely on fuel for production.
Oil marketers
Experts and oil marketers blame the continuing rise in prices at the local pumps on the surging crude prices driven by optimism over the pace of global economic recovery and increased speculation on the commodity by traders.
“The outlooks and past trends point to more expensive fuel in coming weeks and the possibility of unleaded fuel going past Sh90 is real,” says Mr Andrew Omolo, the managing director of Mogas—a local petroleum dealer.
A spot-check by the Business Daily showed that unleaded fuel was retailing at Sh86 a litre within the Central Business District (CBD) although it was still possibly to find same product in some branded stations selling at Sh80 outside the city centre.
On Wednesday, crude prices stood at $78 a barrel and oil marketers Total Kenya and Kenya Shell say that this price is yet to be accounted for on the current prices.
“Prices here are based on the average for the previous month, and we are now consuming fuel that was bought at $74.37 a barrel,” said George Wachira, the director of petroleum focus consultants—a local energy consultancy firm.
This is clear signal that consumers are set for expensive fuel in coming days.
Kenya Shell said local pump prices would continue to move in line with crude oil prices.
Now, analysts led by Goldman Sachs and Merrill Lynch reckon the crude prices could rise to $85 a barrel by year end and to $100 mark in 2010 because of rising oil demand, economic stimulus plans and a weak US dollar.
“Prices may climb to $100 because of the bullish factors,” said Francisco Blanch, Merrill’s head of commodities research, said in a report dated Nov. 12.
Crude oil prices crossed the $100 a barrel mark in March, 2008, pushing local pump prices to Sh110 a litre.
The better than expected US third quarter growth of 3.5 per cent annually has sparked hopes of increased energy demand in the world’s largest oil consumer.
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