Pump prices are expected to ease for the first time in nearly a year in the wake of a sharp drop in the cost of refined fuel imported into the country.
Data seen by the Business Daily shows that the cost of imported refined fuel that will be used to determine prices in the monthly cycle starting Friday midnight has dropped 10 percent to $105.96 per barrel down from the $117.53.
The fall in the cost of refined fuel has led to significant drops in the prices of imported super, diesel and kerosene setting the stage for a fall in the pump prices and a reprieve for consumers beset by a spike in the cost of living.
The average landed costs of imported oil are the single biggest determinants that the Energy and Petroleum Regulatory Authority (Epra) uses to calculate pump prices. Others are the exchange rates of the shilling against the dollar, pipeline and storage costs and margins for the oil marketers.
The shilling has weakened marginally since the last monthly review meaning that barring any last-minute changes, pump prices will drop from Friday midnight.
Currently, a fuel is retailing at record highs of Sh179.30 a litre in Nairobi while diesel is going for Sh165 and Sh147.94 per litre of kerosene.
The pump prices are based on the cost of refined oil which was $117.53 per barrel while shilling exchanged at 120.64 units per dollar.
This will be the first time that fuel prices have dropped even as the State continues the partial removal of the subsidy on diesel and kerosene. The subsidy on super was fully removed on September 14.
Global prices of refined fuel have been on a sustained drop in the past few months on weaning demand in China due to fresh restrictions to curb the spread of the Coronavirus.
Saudi Arabia through the state-owned Saudi Aramco-- one of the biggest sellers of refined fuel— cut the price of its commodity bound for Europe and Asia.
The drop in global prices of refined fuel offers relief to Kenyans who were bracing for more pain at the pump following the withdrawal of the fuel subsidy that had been in place since April last year.
Inflation hit a five-year high of 9.2 percent last month highlighting the adverse impact of the record pump prices.
The costs of energy and transport have a significant weighting in the basket of goods and services, which measures inflation in the country.
The gradual removal of the subsidy on diesel looked set to lead to costlier fuel in what could have further fueled public outrage over the high cost of living.
Kenya was ranked by global risk assessment firm, Verisk Maplecroft as one of the countries alongside Sri Lanka, Peru and Iran that faced a higher risk of civil unrest over the high cost of living.
The Kenyan economy also uses diesel for transportation, power generation and running of agricultural machinery such as tractors, with a direct impact on the cost of farm produce.
The fall in costs of refined oil saw the mean Platts for imported super drop to $820. 60 per tonne from $920.05 while that of diesel fell to $906.72 from $960.54 and kerosene fell to $921.19 from $1,015.91 in August.
The average landed costs of super in Kenya are determined using the mean of Platts for the Mediterranean / European market while that of diesel and kerosene are based on mean Platts for the Arabian Gulf.
Mean of Platts refer to the mean price of oil traded in the Arabian Gulf or the Mediterranean/ European market. They are based on data from Platts (a commodity information and trading company).
But the drop may not last long after the group of 23 oil-exporting countries, commonly known as Opec+, last week reached a deal to slash production by two million barrels per day, a move targeted at pushing prices per barrel back to $100 per barrel for the first time since July.
The cartel, which includes 13-member Organization of the Petroleum Exporting Countries (Opec) like Saudi Arabia and allies like Russia, said the decision was aimed at stabilising prices.
The decision by Opec+ countries has dimmed expectations of lower fuel prices in coming months, a projection that partly informed Kenya’s decision to remove subsidy on petrol last month.
