Petrol price rise fuels fresh inflation fears

The price of petrol has now risen to Sh121 a litre after a review by the regulator on May 14, 2012. Photo/File
The price of petrol has now risen to Sh121 a litre after a review by the regulator on May 14, 2012. Photo/File 

The price of petrol on Monday hit the Sh121 mark, a level last seen in December last year, even as international prices fall and the shilling remains stable.

Higher fuel prices will most likely increase inflation which has been falling for weeks now.

Industry regulator expects the benefits of the strong shilling and lower crude prices to be reflected in the next review though.

Kerosene, mainly used by rural homes and the urban poor, also went up by Sh0.72 a litre while diesel dropped marginally to retail at Sh108.44 per litre. Kerosene will now cost Sh87 in Nairobi, and higher upcountry.

The increases are a continuation from last month when kerosene increased by Sh2.14 a litre, while diesel jumped by Sh3.67 and super petrol went up by 6.81 a litre at a time when international crude oil prices are stabilising.

“The Free on Board price of Murban crude oil lifted in April was posted at $121.20 per barrel, a decrease of 4.6 per cent from $126.99 in March. Over the same period, the mean monthly exchange rate dropped marginally to Sh83.24 compared to $82.82 a month earlier,” said ERC director general Kaburu Mwirichia in a statement.

Last month, fuel prices also increased by Sh6.81 per litre of super petrol to retail at Sh118.50 while diesel jumped by Sh3.68 to Sh108.80 per litre.

Between January and March, crude jumped to $127 per barrel (159 litres) from $114.20 at the beginning of the year.

In April, the shilling stabilised at a mean rate of 83.19 to the dollar compared to 82.8 in March and 83.17 in February.

Analysts are warning that the increases will have a negative effect on inflation rate which has fallen for four consecutive months.

“The effect of an increase in fuel prices will be more immediate than that of food with a long gestation period. There will be a time lag before the impact of the food prices is felt. An increase in the international crude oil prices is a very strong external factor beyond the control of the regulator,” said Mr Benson Kiriga, a policy analyst at Kenya Institute for Public Policy Research and Analysis.