Economy

LPG prices hit eight-year high with Sh1,000 surge

gas

A cooking gas outlet. FILE PHOTO | NMG

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Summary

  • Prices have jumped 48 percent over the last year or almost Sh1,000 since January last year.
  • A spot check by the Business Daily yesterday showed that a 13-kg cylinder of gas from Total was retailing at Sh2,995, Rubis K-gas Sh2,950 and Shell/Vivo’s Afrigas Sh2,990.

The price of cooking gas has hit an eight-year high of Sh2,978 for the 13-kg cylinder as the exclusive club of suppliers that have a tight grip on the market takes advantage of new taxes to push up costs.

Prices have jumped 48 percent over the last year or almost Sh1,000 since January last year -- more than triple the 16 percent value-added tax (VAT) introduced by the government on liquefied petroleum gas (LPG).

A spot check by the Business Daily yesterday showed that a 13-kg cylinder of gas from Total was retailing at Sh2,995, Rubis K-gas Sh2,950 and Shell/Vivo’s Afrigas Sh2,990.

Though industry players attribute the surge to the 16 percent VAT and global prices, the price increases have far outpaced the tax increment. Small gas dealers have accused some big players in the sector of colluding to fix prices, using tax as a cover.

“Prices are going up daily because of the tax, which we are still fighting in court, as well as the monopoly of the importer and Petroleum Institute of East Africa (PIEA), which is acting like a cartel,” said Energy Dealers Association secretary-general Kepher Odongo.

The Energy Dealers Association is a lobby for the small retailers while Petroleum Institute of East Africa represents the big players.

The bulk of the cooking gas used in Kenya comes in through the ports of Dar es Salaam and Mombasa but supply and distribution are concentrated among a few players.

Kenya’s LPG business is mainly controlled by big players, including Total, Vivo, Rubis, Oil Libya and Africa Gas and Oil (AGOL), which owns Proto gas.

Cooking gas prices are not controlled unlike those of petrol, diesel and kerosene.


The government holds that price controls on LPG will deter investors from coming into the sector.

This is, however, exposing the country to runaway prices as the small club of dealers determines pricing due to their market share.

“The market leaders under PIEA have almost the same prices which are usually higher than small players. In fact, PIEA was supposed to be for industry training and not setting prices,” said Mr Odongo.

The Finance Act 2020 amended the VAT Act, removing the supply of LPG including propane from the list of zero-rated items.

The new tax was implemented last year following pressure from multilateral lenders to cut fuel subsidies.

Parliament reintroduced the tax despite opposition from lobbies who wanted it delayed in the wake of the coronavirus-induced hardships that have hurt the purchasing power of households.


The 2019 census report puts the number of urban homes using LPG at 53 percent and rural households at 5.6 percent.

LPG prices for the 13-kilogramme cylinder fell to lows of Sh2,000 in October 2016 after the Treasury scrapped the 16 percent VAT to boost uptake among the poor who rely on dirty kerosene and charcoal for cooking.

LPG uptake more than doubled to 326,000 tonnes last year from 151,000 tonnes in 2016, highlighting the impact of removing the tax.

But prices recently surged when the tax was re-introduced last year but kept increasing over the structure of the LPG market and distribution.

The prices of butane and propane -- the by-products of crude oil used in the manufacture of LPG -- have also risen in the past months on increased demand but low supply in the Gulf countries, which are Kenya’s main source markets of cooking gas.

The rise in the cost of cooking gas is expected to pile pressure on families that are struggling to foot daily bills due to job losses and drastic cuts in earnings in the wake of the coronavirus pandemic.

The impact of these price rallies is expected to be felt in Kenya this year, adding strain on consumers fighting high electricity, food and importation prices.