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Economy

Inflation fears as fuel prices surge to three-year high

A fuel attendant at a Nyeri petrol station on June 15, 2015. PHOTO | JOSEPH KANYI
A fuel attendant at a Nyeri petrol station on June 15, 2015. PHOTO | JOSEPH KANYI 

Fuel prices have hit a three-year high, setting consumers up for a fresh bout of inflation pressures amid higher global oil prices.

Diesel will from Wednesday cost Sh3.70 more per litre, petrol is up by Sh1.03 a litre while kerosene is up Sh5.05. The increases will see motorists pay Sh102.70 per litre of petrol in Nairobi, up from Sh101.67 while diesel will cost Sh92.41 a litre from Sh88.71 at the city pump.

Kerosene, used by poor homes for cooking and lighting, is up Sh5.05 to Sh71.23 a litre in the city, according to the latest adjustment by the Energy Regulatory Commission (ERC). The new prices will be in place for the next one month until December 14 when they are reviewed again.

Fuel costs have climbed for the past three consecutive months to stand at the highest point since November 2014 when petrol cost Sh106.80 a litre while diesel went for Sh94.52. This is set to exert upward pressure on inflation in an economy that relies on diesel to power agricultural machinery, industries and commercial vehicles while the costlier kerosene will hurt poor homes’ budgets.

The ERC controls the maximum petroleum prices through the monthly adjustments based on fluctuations in global crude oil prices, freight costs and forex market. Kenya imports all its petroleum cargo.
Inflation last month eased to a 16-month low of 5.72 per cent due to falling food prices.

The energy regulator said the average landed cost of imported petrol rose 1.42 per cent per tonne, the cost for diesel was up 6.31 per cent while kerosene’s rose 8.12 per cent.

Petroleum prices currently vary across Kenya due to transport costs that reflect how far a location is from Mombasa port where imported consignments land and are stored. Mombasa consumers will pay the lowest at Sh99.42 per litre of petrol following the latest price adjustment and Sh89.13 for diesel.

Petrol is most expensive in the northeastern town of Mandera and motorists will pay Sh116.51 a litre, or Sh17 more than in Mombasa, while diesel will cost 106.21.

Diesel consumption in Kenya stood at 1.24 billion litres in the six months to June, translating to an average intake of 206 million litres monthly. Petrol, mostly used in private cars, stood at 836.4 million litres in the half-year period, or 139 million litres per month.

Petrol is taxed more compared to diesel, used to power trucks, buses, vans, tractors and factories, as part of the government’s policy to encourage productive use of fuel.

Excise duty on petrol is Sh19.89 a litre while the levy on diesel is Sh10.3 per litre, explaining the price difference.

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