Diesel prices have increased by Sh2 per litre, the first time in over a year in what looks set to hit motorists and pile pressure on inflation rates that have been on a drop in recent months.
A litre of diesel will retail for Sh167.06 in Nairobi for the next price cycle to February 14, up from Sh165.06, while that of petrol marginally rose to Sh176.58 from Sh176.29 in the capital, ending a 14-month period of sustained drops as the shilling steadily strengthened against the dollar.
The last time that the cost of fuel rose was in October 2023 when a litre of diesel rose by Sh4.48 to Sh205.47 in Nairobi, while that of petrol jumped by Sh5.72 to Sh217.36.
The rise came despite the shilling marginally gaining against the dollar, with diesel being the only fuel grade whose shipment costs rose.
“In the period under review, the maximum allowed petroleum pump prices for super petrol, diesel, and kerosene will rise by Sh0.29 per litre, Sh2 per litre, and Sh3 per litre, respectively,” Daniel Kiptoo, director-general of Energy and Petroleum Regulatory Authority (Epra), said in the gazette notice last evening.
The Epra used an exchange rate of 129.58 units to the dollar compared to 129.88 applied in the pricing cycle that lapsed on Tuesday at midnight.
The landed cost of diesel rose by 0.06 percent to $644.10 per cubic metre (Sh 83,462.47) from $643.69 (Sh83,602.45) per cubic metre but that of petrol fell by 0.14 percent to $611.69 (Sh79,262.79) from $612.53 (Sh79,555.39) for a similar quantity.
Landed costs are largely determined by the exchange rate of the shilling against the dollar and the price at which Kenya buys fuel in the import markets.
The new prices will also trigger fears amongst Kenyans that fuel prices will remain higher in the coming months.
However, Kenya does not buy petrol, diesel, and kerosene at spot rates (prevailing market rates). Instead, the prices are fixed in line with the government-backed deal with three Gulf oil majors.
Fuel prices started falling from November 2023 largely on falling shipment costs as the shilling slowly started gaining ground against the dollar.
The higher prices that will also see a litre of kerosene go for Sh151.39 up from Sh148.39 are expected to trigger fresh inflationary pressure given that Kenya’s economy is diesel-driven.
Fuel prices have been on a sustained drop since October 2023, largely driven by a strengthening shilling, handing relief to consumers and lower inflation to the government’s target range.
Inflation—a measure of the cost of living—rose to three percent last month from 2.8 percent in November last year, mainly driven by increments in the prices of food, electricity, and transport.
Fuel is one of the most significant factors that determine inflation, given that a vast chunk of the Kenyan economy is diesel-driven.
Diesel is mainly used by public transport operators, electricity generators, and factories. It is also the go-to fuel for the majority of agricultural machinery, making it key in determining prices of farm produce.