Kenya increases fuel prices marginally

NAIROBI - Kenya's energy sector regulator has slightly increased fuel prices with motorists in Nairobi required to pay $1.29 for a litre of petrol.

In its new energy prices review which is expected to be in force between July 15 and August 14, the Energy Regulatory Commission (ERC) said diesel prices will be reduced to retail at 1.19 dollars in Nairobi.

ERC Director General Engineer Kaburu Mwirichia said in a statement received here on Friday that the benefits that could have accumulated from a slight dip in international oil prices were unfortunately affected by a weak shilling which affected procurement costs.

"A weak local currency means that importers have to use more of the shillings to buy the dollars, which are in turn used to buy petroleum products. Hence the decline cancels out with the weak shilling," Mwirichia said.

The local currency has lost ground against major world currencies in the recent past and this coupled with international crude oil prices has pushed up the prices of the petrol, diesel and kerosene which have been rising steadily since December when the government instituted price controls.

During the period, the average landed cost of imported super petrol decreased by 4.4 percent from about 113 dollars per metric tonne in May to 112 dollars in June. There was no let up on kerosene prices which globally also went up by 4.4 percent.

However, following the government's action in April to reduce the profit margin on kerosene to 0.022 dollars in a bid to cushion the poor, the incremental cost will only be 0.005 dollars per litre.  

"The importers are required buy more dollars to import their products and so when the Kenyan shilling has worsened like it did in June by four percent, then it has an impact of increasing the retail pump prices," Mwirichia said.

He said the shutting down of two units at the Kenya Petroleum Refinery, which the energy industry regulator said had a negative impact on the performance of the refinery are among some of the factors that has pushed up the prices.

Since the beginning of June, international prices for both crude oil and refined petroleum products have been volatile making it hard for policy makers to predict which way the prices in the short term will go.  

The east African nation heavily depends on hydropower which is subject to weather patterns and some parts of country are currently facing drought at present amid surge in international oil prices.

The sustained rise in food prices continued to pile pressure on the country's inflation with the June figures standing at 14.5 percent.

According to figures from the Kenya Bureau of Statistics, inflation went up from 12.95 percent recorded in May largely due to a rise in food stuffs such as maize, maize flour, carrots sugar and rice.

Inflation has been identified as one of the major threats facing the Kenyan economy this year. It has risen from a single digit growth in October to December last year to the current 14.49 percent causing a headache to the policy makers.