Economy

Farmers, households take heat from oil price surge

fuel

Farmers, poor households and transporters are set to continue feeling the heat of rebounding global oil prices, with the cost of diesel and kerosene increasing considerably for the second successive month.

The Energy and Petroleum Regulatory Authority (Epra) Sunday increased the retail price of diesel and kerosene by Sh5.51 and Sh5.32 per litre, respectively—citing higher import prices.

The price of petrol, which is largely used by private motorists, also rose by Sh8.19 per litre in the latest review to retail at Sh115.18 in Nairobi—a high of 21-months.

Brent futures prices rallied to more than $60 per barrel, up from less than $40 when the first successful Covid-19 vaccines were announced in November, and less than $20 when the pandemic was raging in April.

“The Free On Board(FOB) price of Murban crude oil lifted in January 2021 was posted at $55.27 per barrel, an increase of 11.5 per cent from $49.57 per bartrel in December 2020” Epra acting director-general Daniel Kiptoo said.

“Over the same period, the mean monthly US dollar to Kenya shilling exchange rate appreciated by 0.57 per cent from Sh110.52 per US dollar in December 2020 to Sh109.89 per US dollar in January 2021”

Yesterday’s price review marked a second successive significant increment in the price of diesel, popularly used in farm machinery and transport vehicle.




The latest price review raised the cost of diesel to a new last recorded 11 months ago in March 2020.

The increase in diesel prices at this time of the year deals a blow to farmers who are set to commence land preparation in readiness for a new planting season that will commence next month and coincide with the traditional March-April-May(MAM) main rain season.

Expensive diesel raises the cost of running agricultural machinery such as tractors.

Kenya’s economy also largely relies on diesel for transportation and power generation, with the price increase expected to impact on the cost of living for households.

The costlier kerosene also piles pressure on poor households, many of whom use it for cooking and lighting.

A sustained climb in oil prices signals heightened risks of imported inflationary pressure, which would reflect on consumer products and services.