News

Petrol prices rise as new tax cuts benefits of crude oil drop

FUEL

An attendant holds a fuel pump at a Nyeri petrol station. PHOTO | JOSEPH KANYI

Petrol prices have increased for the fifth month in row in a review that saw diesel and kerosene costs drop as new inflation tax wiped benefits of lower costs.

The cost of petrol, mostly consumed by private cars, went up by Sh0.29 a litre to Sh115.39 in Nairobi.

The Energy and Petroleum Regulatory Authority (EPRA) linked the rise to a 5.17 percent annual inflation tax adjustment, which affected certain goods that attract excise duty like fuel, alcohol, cigarettes and motorcycles.

The tax increase promises more pain for consumers who are already feeling the pinch of higher cost of basic food items following the failure of the long rains season.

The inflation, which is reviewed annually in July, denied motorists the full benefits of a weak shilling against the dollar and lower crude costs, which dropped from $72.35 per barrel in May to $64.80 per barrel in June.

The tax on petrol rose Sh1.02 per litre while that of kerosene and diesel increased Sh0.53 a litre.

Diesel, which is used to power commercial vehicles like matatus, vans, tractors and trucks as well as in industries decreased marginally by Sh0.88 to Sh103.88 in the city. The drop bucks the rising trend since March. It will favour commercial activities.

Kerosene, mostly used by low income homes for lighting and powering cooking stoves, decreased the most by Sh2.31 to Sh101.97 in the city, according to the new monthly prices set by the energy regulator.

The regulator said the latest review came on the background of a drop in global oil prices but also a 5.17 percent annual inflation tax adjustment on excise duty charged on fuel products.

“The pump prices are inclusive of eight percent Value Added Tax in line of the provisions of the Finance Act 2018 and the revised rates for excise duty adjusted for inflation via legal notice 109 of 9 July 2019,” said EPRA director-general Pavel Oimeke.

The 5.17 percent adjustment saw excise on super petrol go up from Sh19,895 per 1,000 litres to Sh20,923.57, translating to a Sh1.02 per litre increase at the pump. The excise on diesel and kerosene will go up from Sh10,305 per 1,000 litres to Sh10,837.77, translating to a Sh0.53 increase per litre.

Fuel remains one of the most heavily taxed commodities with six levies and two taxes for petrol and diesel.

The monthly EPRA review is dependent on the average landed cost of imported oil, Free On Board (FOB) price of Murban crude oil lifted as well as the mean monthly dollar to shilling exchange rate. The shilling depreciated by 0.68 percent against the dollar to 101.89 in June.

In far flung areas like Marsabit, a litre of petrol will sell at as high as Sh121.81 per litre.