Consumers get reprieve as ERC cuts fuel prices

The cost of fuel has dropped on the back of falling international prices, boosting efforts to tame inflation, which has been falling for months now.

Kerosene, mainly used by rural homes and the urban poor dropped with the highest margin of Sh3.80 a litre while super petrol dropped by Sh3.46 per litre. The price of diesel also dropped by Sh2.93 per litre.

The latest review by the Energy Regulatory Commission means that kerosene will now cost Sh83.20 in Nairobi, super Sh117.50 and diesel Sh105 per litre.

The commission said the benefits from cheaper crude oil and refined products would have been higher were it not for the weakening shilling.

The average exchange rate for the month deteriorated by 1.8 per cent to 84.74 to the dollar in May from 83.24 in April.

“Further gains will be passed on to consumers in subsequent reviews if the downward trend in the price of crude and refined products continue to hold,” ERC said in a statement.

Consumers welcomed the reductions but said they were expecting more cuts.

“Of course it is good news but it remains grossly inadequate,” said Stephen Mutoro, the Consumers Federation of Kenya CEO.
The review comes as pressure mounts from Parliament and court actions to have ERC review the formula it uses to set monthly prices.

On Wednesday, MPs called for the ERC to be disbanded after its May prices failed to reflect the decline in crude oil prices to $121 per barrel in April from $126 in March.

Instead ERC increased the retail prices of super petrol by Sh6.81 per litre, diesel by Sh3.67 and kerosene by Sh2.14.

“Now that ERC has failed to regulate prices, this House is demanding on behalf of Kenyans the commissions’ immediate disbandment,” said Public Accounts Committee chairman Boni Khalwale.

Energy assistant minister Mohammed Mohamud defended the commission’s decision to increase the price of super petrol and kerosene, saying its average landed cost increased by 2.93 per cent and 0.75 per cent in April.

“Over the same period, the mean monthly exchange rate weakened marginally to Sh83.24 per dollar in April compared to Sh82.82 per dollar in March 2012,” Mr Mohamud said.

Emuhaya MP Wilbur Otichillo said the 60 days it takes to process crude and get products into the market was denying consumers the benefits of favourable price movements in the oil market.

Mr Mohamud said sensitivity and volatility of oil prices would continue because the government has not been able to develop oil strategic reserves.