Gas prices remain high as global crude oil prices plunge

Gas consumers continue to pay a stiff price despite a steep drop in international crude costs and marginal declines at local petrol pumps, with gas persistently retailing above Sh3,000 per 13 kilogramme cylinder.

Kenya National Bureau of Statistics (KNBS) data shows the average price of a 13 kilogramme cylinder of gas stood at Sh3,018 at the end of December.

While the deregulated price has shown signs of coming down over the past three months, climbing down slightly from a high of Sh3,111 in October, the current prices are 5.5 per cent higher than a year ago. Oil sector experts say while the expectation would be for LPG prices to reduce as crude oil and natural gas prices decrease, inefficient distribution makes this difficult in the Kenyan market.

READ: Falling fuel, food prices cut inflation to 17-month low

“For Kenya, it is the cost of supply chain logistics that makes LPG expensive, and this will always be the case irrespective of level of global prices. It is only an efficient and robust LPG import and distribution infrastructure that will enable Kenyan consumers to fully enjoy the benefits of global LPG price fluctuations,” said Petroleum Focus Consultants director George Wachira.

International crude oil prices have dropped to a five-and-half year low of about $55 a barrel, a fall of 52 per cent compared to the June 2014 price of $115 per barrel.

The adjustment of petrol prices in Kenya has, however, not matched that of international crude, dropping by narrower margins of between 6.9 per cent and 9.7 per cent over the period going by the latest Energy Regulatory Commission (ERC) recommendation for December 14.

Mr Wachira though says there is a lead time on arrivals for new and cheaper imports, which for LPG can take as long as two months.

“The ERC needs to have in place an effective LPG cost/price monitoring system to advise when retail price interventions are necessary. ERC can issue consumer price advisories to guide the market if need arises,” said Mr Wachira.

ERC is planning to introduce a price regulation mechanism for gas similar to that of petrol, diesel and kerosene, in regulatory changes to be contained in the upcoming Energy Bill that is yet to be tabled in Parliament.

“In the new Energy Bill we will have the mandate to regulate all the tariffs in the energy sector. At the moment the regulations specify only pump prices, so we cannot do regulation on LPG prices,” said ERC director of petroleum Linus Gitonga.

In a bid to address the supply inefficiencies and bring down prices, ERC last year said it would push for the implementation of an open tender system for gas imports, modeled on the one already in place for petroleum.