In Kenya, the current global prices are yet to be fully reflected in the monthly ERC pump price changes, which imply minor increases in the next monthly price adjustments. FILE PHOTO | NMG
The Opec oil production balancing last week was an act of deft consensus building among players with diverse political interests and influences.
Last week, the Organisation of the Petroleum Exporting Countries (Opec) and its allies in oil “production control” agreed to increase oil production by about one million barrels per day. This was intended to balance out any shortage that may arise out of the US sanctions against Iran and also the under-supply from Venezuela. This balancing act avoids a glut that would otherwise reduce prices.
A month ago the prices had shot to above $80 when US announced its economic sanctions against Iran, but these have since slumped back to the current levels of about $75. Unless other geopolitical happenings trigger market speculation, prices are expected to stabilise at these levels.
In Kenya, the current global prices are yet to be fully reflected in the monthly ERC pump price changes, which imply minor increases in the next monthly price adjustments.
The Opec oil production balancing last week was an act of deft consensus building among players with diverse political interests and influences. The “Opec-plus” now consists of the regular members plus allies of convenience who include Russia.
The expanded alliance produces about 60 per cent of global oil supplies, which gives the group a significant clout in determining the direction of global oil markets.
Within the expanded group we have Saudi Arabia and Iran which are avowed regional foes with the USA strongly on the side of Saudis. The Saudi king visit to Moscow last year set the stage for strong economic co-operation between Russia and Saudi Arabia especially in the area of oil supply synergies. Russia is also a very strong ally of Iran. This makes Moscow the apparent bridging diplomat of the expanded Opec+ group.
US President Trump with his policies and actions is impacting global trade including oil markets. Nations and global firms have learned the hard way that they dare not cross lines drawn by Donald Trump without expecting consequences.
This is more the case with Iranian sanctions. The EU unsuccessfully tried to encourage their firms to maintain trade ties with Iran, but none dared. The giant French oil company Total which had already entered into strong investment commitments with Iran will now disengage from Iran.
Last week Trump actually asked Japan to desist from buying any Iranian oil. This time around Iran and its oil with face the full wrath of Donald Trump.
It is President Trump who requested Saudi Arabia to ensure that oil production is stepped up to avoid shortages and price escalation, which would have caused negative publicity on Iranian sanctions. The Saudis complied and got the Opec-plus to do just that.
In the background, China and Russia are working on ensuring that their global trade including oil is less dependent on US financial systems and the Dollar so as to lessen potential economic blackmail by US. They are working on an alternative currency to price oil to reduce dollar stranglehold.
Back to Kenya and the budgetary actions on petroleum. The budget speech did not make any mention of the 16 per cent VAT on petroleum products previously planned for September. It is hoped that the Treasury will not implement the VAT action. At a time of escalating global oil prices, the VAT would result in negative unintended consequences on an economy that is struggling to recover.
The CS equalised Kerosene import tax with that of diesel with the intention of reducing diesel adulteration. However with a tax differential of Sh9.59 per liter still reigning between kerosene and petrol, the adulteration frequency will now increase with a vengeance towards petrol users.
This is why the fight against adulteration has to seriously shift to the elimination of this crime. The vice should now move up the “to-do list” for both the DCI and DPP and address corruption and collusion in the enforcement trail. The innocent poor kerosene user can only shoulder so much more taxes in the name of fight against adulteration.
In East Africa, the upstream oil and gas investors, encouraged by the ongoing firming up of prices, are now planning to announce in the course of the next one year, final investment decisions for resource development and export infrastructure.
PAYE Tax Calculator
Note: The results are not exact but very close to the actual.
