Commodities

Oil prices drop sharply, eyes on Kenya subsidy

fuel

An attendant fuels a vehicle in Nairobi. FILE PHOTO | NMG

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Summary

  • International oil market data shows that the prices for the UAE’s Murban oil — Kenya’s main petrol source market — has dropped from a high of $83.60 a barrel on November 24 to $74 on Tuesday.
  • Experts hold that Kenyans may not enjoy reduced prices for petrol, diesel and kerosene from next month adding that the State will likely opt to discontinue applying the subsidy that has been in place since April.

Crude oil prices have fallen sharply in the past two weeks on concerns over possible decline in global demand due to the Omicron variant of Covid-19, but Kenyan motorists risk missing out on the benefits should the government opt not to apply the price subsidy in the January 2022 review.

International oil market data shows that the prices for the UAE’s Murban oil — Kenya’s main petrol source market — has dropped from a high of $83.60 a barrel on November 24 to $74 on Tuesday, having gone as low as $69 at the beginning of the month.

But experts hold that Kenyans may not enjoy reduced prices for petrol, diesel and kerosene from next month adding that the State will likely opt to discontinue applying the subsidy that has been in place since April as it looks to replenish the fund.

“Over the last months, prices have been subsidised but even if the global prices are coming down, there may not be further reduction because the government may opt to remove the subsidy because prices are coming down,” said Powell Maimba, a petroleum expert and former chairman of the Petroleum Institute of East Africa.

It has been used to stabilise prices amid a public outcry over the high cost of fuel, meaning that without it motorists would be paying more than the current Sh129.72 per litre of petrol and Sh110.60 for diesel.

Import orders

Kenya has been importing refined petroleum since it shut down its refinery in 2013, meaning there is a lag of between 30 and 45 days between the placement of import orders and delivery of the commodity.

This means that today’s crude prices can only reflect in the January 2022 price review.

Several countries have already enacted fresh travel restrictions to curb the spread of the new variant.

There are also fears on the effectiveness of the current Covid-19 vaccines against the new variant.

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