Kenyans have arguably endured the toughest year due to high energy costs, as petrol and diesel prices breached the Sh200 mark a litre while cooking gas and electricity shot through the roof.
A litre of super petrol and diesel will close the year at Sh212.36 and Sh201.47, respectively, in Nairobi, while kerosene—mainly for cooking and lighting by low-income homes— is going for Sh199.05 in the capital.
Consumers are paying Sh3,031.82 to refill the 13-kilogramme cooking gas, compared to the Sh2,961.93 at the start of the year, as prices edge closer to levels last seen before the scrapping of the value-added tax (VAT).
Power bills shot up by up to 43 percent, with 200-kilowatt hours (kWh) costing Sh6,620.68 this month compared to Sh5,278.44 in January, while 50kWh is going for Sh349.48 from Sh143.91 in the same period.
The price surge, except for the cooking gas, has been driven by heavy taxation rates and a wobbling shilling and had a ripple effect on the cost of services and goods.
But the Energy and Petroleum Regulatory Authority (Epra) says consumers will enjoy price cuts at the pump in the New Year on the continued drop in global fuel prices in the last couple of months.
“The drops will continue into the New Year in line with what we are seeing globally, but for now, we are past the toughest times,” Epra director-general Daniel Kiptoo told the Business Daily recently.
A litre of super petrol and diesel retailed at Sh177.30 and Sh162 in Nairobi, while that of kerosene went for Sh145.94, meaning that prices have surged by up to Sh53 per litre with kerosene consumers taking the biggest hit.
The continued weakening of the Kenya shilling to the dollar meant that higher costs of petroleum products would be passed on to consumers. For example, in the latest monthly fuel price review announced on December 14, banks quoted higher exchange rates for the dollar than the one the Central Bank of Kenya published, denying Kenyans a bigger drop in pump prices.
A litre of super petrol dropped to Sh212.36 in Nairobi from Sh217, while that of diesel fell to Sh201.47 from Sh203.47 in the new monthly cycle that ends on January 14.
But the prices should have dropped by an even wider margin had the Epra used an exchange rate of CBK’s rate of Sh153.11 instead of the Sh157.52 to the dollar.
The rise in local pump prices once again put the government’s taxation policy on the spot, given that globally, crude prices have been dropping and closed the year at $79.88 a barrel compared to $80 per barrel in January.
Kenya has one of the highest taxation rates on fuel in the world, with the levies and taxes accounting for up to 37 percent of the cost of a litre, placing the country way ahead of countries such as the US and South Africa.
There are seven levies and two taxes on fuel. The VAT on the commodity was doubled to 16 percent from July 1, adding pain to consumers just a few months after the Epra gazetted higher retail tariffs for electricity. Prices rose by between 15 percent and 20 percent on average in April. Notably, the base consumption charge was increased to Sh12.22 per unit from Sh10 for lifeline customers in the first electricity tariff review since 2018.
Power consumers had to also contend with frequent outages. The new tariffs came months after Dr Ruto promised Kenyans no further increase in electricity prices as he sought to give hope to a nation stung by the high cost of living.
“There will be no additional charges today or going into the future on electricity bills,” Dr Ruto had assured the nation in January as he sought to comfort Kenyans grappling with a high cost of living.
But perhaps puzzling has been the recent spike in the price of cooking gas, which has undone the government’s decision to scrap the eight percent VAT on the commodity in July in a bid to lower costs.
The Dr Ruto administration has an ambitious plan to increase the number of people using cooking gas by 2025 as part of curbing environmental pollution and reducing the health complications tied to the use of kerosene, firewood, and charcoal.
Higher energy costs saw inflation—a measure of the cost of living over 12 months— hit 9.2 percent in March, the highest, so far, in the year.
Kenya’s economy is mainly diesel-driven. Therefore, the high price of the commodity increases the cost of electricity, farm produce, services, and goods as manufacturers and service providers pass on the higher energy costs to consumers.
But while the global prices of refined fuel continue to drop in the global market, the weakening shilling looks set to deny consumers an even bigger price cut in the New Year.
