Motorists will from midnight enjoy a record drop in pump prices after the Energy and Petroleum Regulatory Authority revised down fuel costs.
The prices of petrol and diesel have dropped by Sh18 and Sh4.09 per litre respectively.
Kerosene, relied upon by low-income households for lighting and powering cook stoves, has recorded the biggest margin decreased by Sh18.18.
Petrol prices have dropped by the biggest margin since Kenya started controlling fuel prices in 2010 with super fuel being cheaper for the first time than diesel.
Motorists in Nairobi will pay Sh92.87 per litre of super petrol from Sh110.87, representing a Sh18 drop while diesel dropped Sh4.09 to Sh97.56.
The Energy and Petroleum Regulatory Authority (EPRA) linked the cheap fuel to the plunge in crude oil prices after a fallout between Saudi Arabia and Russia to cut production in the wake of the coronavirus pandemic, which has cut demand for energy on reduced economic activities.
Producers of services such as electricity and manufactured goods are also expected to factor in the lower cost of petroleum, unleashing a lower pricing pressure across the economy with impact on the cost of living measure.
In Kenya, for instance, the majority of the population relies on kerosene and gas for lighting and cooking, making crude price a key determinant of the inflation rate.
The energy regulator said the new petrol prices are based on crude cost of $35.58 in March, representing a drop from $56.10 posted in February.
“It is worth noting that the diesel cargoes used in the computation of this month’s prices were procured in February when the crude oil prices were relatively high,” it said.
“Accordingly the effect of the recent crash in crude oil prices will be reflected in the retail price of diesel in subsequent reviews,” said EPRA.
This is a pointer that diesel prices will fall at the next review on May 14. Kenya, which has set a cap on prices of petrol, diesel and kerosene, lists maximum prices for each county at mid-month and they remain valid for a month. Costs of energy and transport have a significant weighting in the basket of goods and services used to measure inflation in Kenya. Inflation dropped to 6.06 percent in March from 6.37 percent in February
Cheaper diesel will also impact on monthly electricity prices given the fuel levy on power bills — which is influenced by fuel prices and amount of diesel generators in the national grid. The fuel levy is the biggest driver of monthly changes in power bills. The economy also uses diesel for transportation, power generation and running of agricultural machinery such as tractors with a direct impact on the cost of agricultural produce.
Saudi Arabia slashed its official selling prices and made plans to ramp up crude output next month after Russia balked at making a further steep output cut proposed by the Organisation of Petroleum Exporting Countries (Opec) to stabilise oil markets.
Oil prices remained low this week as the historic production-cut deal inked by major global oil producers was not enough to assuage existing worries about the demand destruction brought on by the Covid-19 pandemic.
Worldwide fuel consumption is down roughly 30 percent because of the deadly disease that has killed more than 122,000 people worldwide and kept entire nations on lockdown.
Opec, along with Russia and other countries, agreed over the weekend to cut output by 9.7 million barrels per day in May and June, representing about 10 percent of global supply.
In addition, several other countries will reduce output as well, for an estimated total cut of about 19.5 million bpd.
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