Petrol, diesel, kerosene prices climb on delay of cheaper July products

What you need to know:

ERC says it typically takes 30 to 45 days between the award of a tender and delivery of the products, leading to a situation like the current one where a fall in global crude prices is not immediately enjoyed by consumers.

Prices of petroleum products increased by up to Sh2.2 per litre, driven by a delay in delivery of cheaper products that saw the prices set based on more expensive June supplies.

The maximum retail prices of petrol, diesel and kerosene have all increased in the latest price review by the Energy Regulatory Commission (ERC) which will be in force until September 14.

The price per litre of petrol in Nairobi now stands at Sh95.13 while that of diesel is set at Sh84.51. Kerosene now retails at Sh62.48 per litre in the city.

“Taking into account the weighted average cost of imported refined petroleum products … the maximum allowed petroleum pump prices in Nairobi are as follows: super petrol increases by Sh2.2 per litre, diesel increases by Sh1.27 per litre while kerosene increases by Sh1.03 per litre,” ERC said in a statement.

The price jump will add new inflationary pressure on businesses and households as the cost of transport, manufacturing and cooking rises.

“The free on board (FOB) price of Murban crude oil lifted in July was posted at $44 (Sh4,444) per barrel, a decrease of 9.07 per cent from $49.05 (Sh4,954) per barrel in June 2016,” ERC said in a statement.

“However, due to the time lag of 30-45 days between order placement and delivery, a majority of the cargoes that have been used in this month’s pump price computation were June cargoes.”

The regulator added that the July drop in crude prices will be reflected in local pump prices in subsequent price reviews.

Typically takes 30 to 45 days

Kenya imports petroleum products through the Open Tender System (OTS) where an oil marketer is awarded the contract of shipping in the commodities in a competitive bidding process.

ERC says it typically takes 30 to 45 days between the award of a tender and delivery of the products, leading to a situation like the current one where a fall in global crude prices is not immediately enjoyed by consumers.

The regulator said the landed cost per tonne of petrol increased 3.31 per cent to $521.72 (Sh52,693), followed by diesel at 3.18 per cent to $469.1 (Sh47,379) and kerosene at 2.86 per cent to $493.86 (Sh49,879).

Besides the delay in deliveries, a weakening of the shilling by 0.19 per cent against the dollar to 101.39 units also caused the increase in the price of the petroleum products.

Higher petroleum prices come at a time when inflation has risen for two consecutive months, signalling that the cost of living could rise further this month.

Inflation rose to 6.39 per cent last month compared to 5.8 per cent in June, partly driven by a sharp jump in the price of petroleum products on the expansion of the road maintenance levy by Sh6 per litre.

This saw the price per litre of petrol rise by Sh6.76 to Sh92.93, that of diesel by Sh9.53 to Sh83.24 and that of kerosene by Sh3.41 to Sh61.45.