Higher fuel prices spark fears of fall in demand for goods

Manufacturers have expressed fears that the recent fuel price increase will diminish consumers’ purchasing power, slowing down demand for their goods and in effect blunting economic growth.

The Energy Regulatory Commission (ERC) increased pump prices for super petrol by Sh6.81, while diesel costs went up by Sh3.67 a litre in this month’s review.

The regulator put the maximum retail price of super petrol at Sh118.50 and diesel at Sh108.80 in Nairobi. Kerosene will retail at Sh86.28, a Sh2.14 rise from last month’s price.

“The person who will be under pressure is the consumer, there will be reduced demand,” said Polycarp Igathe, vice chairman of the Kenya Association of Manufacturers and managing director of Haco Tiger Brands.

“For us we do not change our prices based on frequent (fuel) price changes unless they persist. So really it may not affect us but it will affect the consumer.”

The increase in fuel prices is expected to continue in the coming months, as a result of a steep upward trend in the price of crude and refined petroleum products in the international market.
Public transport operators sent mixed signals regarding the price increases.

Matatu Welfare Association national chairperson Dickson Mbugua said they would meet later this week to discuss the latest fuel price increase.

“We will meet on Thursday to discuss the situation but the thinking in the sector is that the fares should go up,” said Mr Mbugua. “When fuel prices went down some did not reduce their fares so we do not know who we will be increasing fares…but we will discuss it extensively.”

Wilfred Kimotho, national chairman of the 4NTE Sacco, said his members, who ply the Nairobi, Nakuru, Eldoret routes, would not increase their charges.

“Others have already increased but as a Sacco we have decided not to increase this time,” said Mr Kimotho.

“We increased the last time the fuel cost went up and did not lower (when they dropped), so we feel it is prudent not to increase because our customers will suffer.
Transporters make a big impact whenever they raise their charges since the increases are transmitted through the economy.

Explaining this month’s increase, the ERC noted that between February and March, the average cost of imported Super Petrol a tonne increased by 14.67 per cent, while diesel increased by 4.87 per cent.

Kerosene prices rose by 4.79 per cent in the same period.

This is despite the current stability of the Kenya shilling against dollar.

The mean monthly exchange rate remained stable at 82.82 units per dollar in March, compared to 83.15 units per dollar in February.