Petrol cut of Sh9 biggest monthly adjustment in fuel price control era

What you need to know:

ERC on Wednesday cut the price of petrol, mainly used to run personal cars, by Sh9.36 per litre to Sh93.29 in Nairobi.
But diesel is up Sh2.44 per litre to Sh82.43 in the capital, while kerosene increased Sh3.49 a litre to Sh56.04.
The regulator attributed the variation in the price movements of petrol, diesel and kerosene to different import costs of the commodities.

Petrol prices have dropped by the biggest margin since December 2010 when the energy regulator started controlling the cost of fuel, offering a big relief to motorists.

The Energy Regulatory Commission (ERC) on Wednesday cut the price of petrol, mainly used to run personal cars, by Sh9.36 per litre to Sh93.29 in Nairobi.

But diesel, used for powering industries, trucks, buses and agricultural machinery, is up Sh2.44 per litre to Sh82.43 in the capital.

Kerosene, which low-income households rely on for cooking and lighting, increased Sh3.49 a litre to Sh56.04.

The ERC attributed the variation in the price movements of petrol, diesel and kerosene to different import costs of the commodities.

“The fact that petrol is down and other products are up is purely due to market dynamics given the high demand for refined kerosene and diesel compared to gasoline,” director-general Joseph Ng’ang’a told the Business Daily in a phone interview.

Kenya buys refined petroleum products after its sole refinery, the Kenya Petroleum Refineries Ltd, in Mombasa was shut down in September 2013, denying the country the full benefits of the lower crude oil prices.

READ: Motorists to benefit as petrol prices plunge by Sh9

Mr Ng’ang’a said the aviation sector is driving demand for kerosene while the preference for diesel cars, especially in Europe, was putting pressure on diesel prices.

The costs of imported super petrol decreased 18.86 per cent to $564.47 per tonne in September from $695.68 in August, says ERC.

The price of imported diesel rose 5.78 per cent in the review period while that of kerosene was up 6.43 per cent.

Higher diesel prices are expected to put pressure on manufacturers’ production costs that in turn could pass the additional costs to consumers.
Transport expenses could also come under pressure as diesel-run trucks and buses absorb higher diesel prices.

The average fare for a 350-kilometre trip in a country has dropped from Sh964 in January to Sh937 last month, according to the Kenya National Bureau of Statistics.

Thermal power plants also use diesel for their generators. Fuel prices have a significant impact on inflation which rose marginally to 5.97 per cent last month from 5.84 per cent in August.