Economy

Petroleum consumption hits record high on low pump prices

car

A petrol station attendant fuels a car. Petrol pump price stood at high of Sh110 in January 2014 before falling to Sh102 in December. PHOTO | FILE

Kenya’s consumption of petroleum hit a record high last year as motorists took advantage of lower pump prices to fill their tanks and keep their cars on the road, newly released industry data shows.

Consumption of petroleum rose to 1.5 billion litres last year up from 1.2 billion litres in 2014 or a 25 per cent growth — the highest rate ever — according to the Energy Regulatory Commission (ERC).

The growth was mainly driven by private cars that accounted for more than a quarter of the total consumption.

“Consumption of super petrol has significantly increased as more people get their cars on the road, encouraged by the psychological comfort that fuel is now cheaper, hence more road trips,” said Edward Kinyua, the acting director of petroleum at the ERC.

Falling fuel prices have brought more vehicles on the roads, causing heavy congestion that has in turn increased the volume of fuel consumed.

Urban motorists have often cited a rickety public transport system that is mainly controlled by cartels and even criminal gangs to justify their use of private cars for daily commute.

Previous attempts to introduce mass transport solutions like park-and-ride, where motorists leave their vehicles outside the city centre and use high-capacity buses or trains to the city centre, have all flopped.

Nairobi, which accounts for nearly 60 per cent of the national traffic, has in recent months been experiencing crippling traffic jams during peak morning and evening hours.

This has partly eroded the capital city’s appeal, and weakened its ranking in global living standard surveys.

Consumption of diesel, used to power trucks, buses, vans and factories, hit 2.4 billion litres from two billion in 2014, representing a rise of 15 per cent.

The ERC, which caps maximum retail prices of petrol, diesel and kerosene, last year made multiple cuts on pump prices in response to tanking global oil prices.

Last year, petrol prices stood at Sh92 a litre in January in Nairobi and Sh90 in December while diesel retailed at Sh83 at the beginning of the year but had dropped to Sh78 in December.

Petrol pump price stood at high of Sh110 in January 2014 before falling to Sh102 in December while diesel retailed at Sh104 at the start of the year and Sh14 less in December.

Kenya now imports all its refined petroleum products after closing down the country’s only refinery three years ago.

READ: Cooking gas prices now drop to a four-year low

The country imported Sh70 billion worth of petrol in 2014, up from Sh58 billion a year earlier when the refinery was still operational.

Lower crude prices have ensured that the rising domestic appetite for petroleum products has not translated to a higher import bill.

The cost of petroleum imports dropped sharply to Sh235.9 billion last year from Sh346.8 billion in 2014, saving the economy Sh110 billion — an amount that is slightly higher than the cost of constructing three 50-km Thika superhighways.

Petroleum sector players say the Kenyan economy would have reaped more benefits had it invested in larger storage facilities that would enable it to take in more imports while oil prices are low for future use.

Petroleum products play a central role in the economy because any price movement is transmitted to nearly all sectors of the economy, including transport, manufacturing and agriculture.

Road expansion has, however, failed to keep pace with the volume of cars being added on the roads, piling pressure on the existing infrastructure.

A study by IBM Corporation, a US technology and consulting firm, in 2012 established that Kenya loses Sh50 million a day in wasted man hours in traffic jams.

Another study by Japan International Cooperation Agency (Jica), commissioned by the Nairobi county government, found that in 2013 the average speed of traffic in the capital was 40km/h.

The speed is forecast to halve in the next 15 years with the continued growth in the number of cars on the roads coupled with the slow pace of infrastructure expansion.

The number of new automobiles bought last year stood at 247,181 compared to 218,057 a year earlier, according to Kenya National Bureau of Statistics (KNBS).

Kenyans purchased 14,369 saloon cars in 2015 and 54,120 station wagons while the number of new buses on the roads stood at 2,342. Some 13,878 vans also came on board.

The ERC last year announced plans to rein in Kenya’s vehicles-related carbon footprint — an effort that was to be jointly executed with the National Environment Management Authority (Nema) and the Kenya Bureau of Standards (Kebs).

The country has since introduced new motor vehicle carbon emission rules that have significantly increased the cost of popular used imported cars.

The new levy is expected to come in the form of carbon emission fees charged on imported vehicles that emit fumes beyond a yet-to-be determined level. Buyers of eco-friendly cars would be offered rebates.

The ERC’s feebates (fee/rebates) plan will require owners of cars with carbon emissions in excess of the benchmark to pay a fee on top of the purchase price.

Those whose emissions are below the benchmark would get a rebate depending on how far the emissions fall below the set limit.