Weak economic growth reduces fuel consumption

Kenya’s fuel consumption for the first half of the year dropped marginally by 4,780 metric tonnes, reflecting stunted economic growth and reduced usage of diesel to generate electricity.

The total fuel consumption remained almost flat at 1.74 million metric tonnes during the first six months of the year, according to leading data from the bureau of statistics.

The reduction is attributed to the good rains in the first half of the year which cut reliance on thermal generated electricity as well as the record high prices of fuel which reduced consumption.

Economic growth weakened by two percentage points to 3.5 per cent in the first quarter from 5.1 per cent, also contributing to the slow fuel consumption.

Electric power produced through thermal generation dropped in the first half of the year while hydro energy went up, according to Kenya National Bureau of Statistics (KNBS) data.

Total power generated from thermal dropped from 1,259.4 million kWh in the first half of 2011 to 1,003 million kWh between January and June this year.

Meanwhile, electricity generated from hydropower in the first half of the year increased to 1,891 million kWh from 1,570 million kWh last year.

“Kenya relies on fuels to generate extra energy when hydro is low, this year there was enough rain which increased power from hydro sources,” said economic expert Robert Shaw in an interview.

In the first half of 2011, Kenya experienced drought after the failure of March to May rainfall which reduced water in some of its major dams affecting power supply. During the period, KenGen turned to diesel generators to cover for the shortfall. 

More than half of Kenya’s power output is generated from hydro sources.

The reduction in reliance on thermal power is a good sign for the economy and signals relief to consumers, which will ultimately impact on the price of goods and services and the electricity bills.

“The reduction in the oil consumption is generally a good sign because it means less pressure on foreign exchange and relief to the consumers,” said the Energy Regulatory Commission (ERC) Director General, Kaburu Mwirichia.

It’s an assertion that Mr Shaw agrees with. “Oil bill is straining the economy and especially over reliance on fuel as power generation makes everything expensive,” said Mr Shaw.

The total fuel and lubricants imports made up 26.2 per cent of the Kenya’s imports over the six months, which is a slight drop compared to 28 per cent in a similar period in 2011.

The data in Kenya’s economic survey 2012 shows in 2011, the trade deficit widened further from Sh537,412 million in 2010, an increase of 49.7 per cent.