The Energy & Petroleum Regulatory Authority (EPRA) of Kenya has announced that the maximum retail prices for petroleum products will remain unchanged for the period from 15th August to 14th September 2024. This decision follows the statutory guidelines laid down in the Petroleum Act of 2019 and subsequent Legal Notices, particularly Legal Notice No.192 of 2022. The unchanged prices reflect Kenya’s complex interplay of international oil markets, exchange rates, and domestic taxation policies.
Current Prices and International Market Trends
During the review period, the prices for Super Petrol, Diesel, and Kerosene will remain steady, despite some fluctuations in the global landed costs of these products. Super Petrol saw a slight decrease in landed costs, dropping by 1.06% from USD 716.03 per cubic metre in June 2024 to USD 708.47 in July 2024. Conversely, the cost of Diesel rose by 1.62%, increasing from USD 682.73 per cubic metre to USD 693.82. Kerosene experienced the highest price increase, with a 1.87% rise from USD 692.80 per cubic metre to USD 705.74.
These adjustments are reflective of the volatility in international petroleum markets, as observed by S&P Global Platts, a leading provider of energy and commodities information. The global market prices for these commodities showed mixed trends, with Super Petrol, Diesel, and Kerosene showing varied fluctuations over the past few months. The fluctuations are attributed to multiple global factors, including supply chain disruptions, geopolitical tensions, and changes in production levels among key oil-producing nations.
Exchange Rate Impact on Local Pricing
Kenya’s dependency on imported refined petroleum products means that international pricing and exchange rates are critical factors in determining local pump prices. All petroleum products imported into Kenya are priced in U.S. dollars. The recent trends in the USD-Kenya Shilling (KShs) exchange rate have had a direct impact on the computation of local pump prices.
Over the last 12 months, the exchange rate has seen significant fluctuations. From August 2023 to July 2024, the exchange rate moved from KShs 148.98 to KShs 158.81 per USD, adding a layer of complexity to the pricing of petroleum products in Kenya. The weaker Kenyan Shilling has partially offset the benefits of any reduction in global oil prices, making it more challenging to pass on savings to consumers at the pump.
Murban Crude Oil Prices and Their Influence
Murban Crude Oil, a benchmark for oil pricing, has also exhibited volatility over the past year. From August 2023 to July 2024, the price of Murban Crude Oil varied significantly, with the lowest price recorded at USD 77.68 per barrel in November 2023 and the highest at USD 93.92 per barrel in August 2023. These fluctuations directly influence the cost of refined petroleum products imported into Kenya, further complicating price stability efforts.
Taxation and Regulatory Compliance
The prices set by EPRA are inclusive of a 16% Value Added Tax (VAT), in line with the provisions of the Finance Act 2023, the Tax Laws (Amendment) Act 2020, and revised excise duty rates adjusted for inflation as per Legal Notice No. 194 of 2020. The inclusion of these taxes reflects the government’s fiscal policies, aimed at revenue generation while also maintaining a balance with consumer affordability.
Despite the fluctuations in global oil prices and exchange rates, EPRA’s decision to keep local prices unchanged is a measure to stabilize the market and shield consumers from abrupt price increases. The Kenyan government continues to navigate the complexities of global energy markets, domestic economic conditions, and fiscal policies to ensure the availability and affordability of essential energy supplies.
Implications for Consumers and the Economy
The stability in fuel prices for the next month, according to EPRA, offers some respite for consumers, especially against the backdrop of rising living costs and inflationary pressures in the country. For businesses and the transport sector, stable fuel prices provide a predictable environment, crucial for planning and operational efficiency.
However, the broader economic implications remain a concern, particularly as Kenya continues to grapple with a weak Shilling and the potential for global oil market disruptions. Any future shifts in these variables could prompt adjustments in local pump prices, potentially impacting inflation and economic growth.
In conclusion, while the decision to maintain current fuel prices provides short-term relief, it underscores the need for long-term strategies to mitigate the impact of global market fluctuations and exchange rate volatility on Kenya’s energy sector. As the country continues to rely heavily on imported refined petroleum products, the ongoing monitoring and adjustment of retail prices by EPRA will remain a critical component of Kenya’s energy policy.
