This archive report was first published on 4 October 2021.
Kenya is bracing itself for a perfect storm in the fuel market, with crude oil prices reaching a three-year high of $80 per barrel. This development is expected to reflect in higher local prices in the coming weeks, exacerbating the already high cost of fuel.
The situation is worsened by a weak shilling, which has sunk to an eight-month low of Sh110.49 against the US dollar. This has significant implications for the direction of pump prices, as the cost of crude oil and the local currency's performance against major world currencies are key factors in determining the retail price of petrol.
The Energy and Petroleum Regulatory Authority (Epra) has warned of higher prices, with Director-General Daniel Kiptoo stating that prices may rise in the next two months. He explained that the regulator uses crude oil prices of the preceding month and the initial days of the following month to determine prices for any pricing cycle.
At $80 per barrel, this is the highest cost of crude oil since October 2018. The high fuel prices in the country have been blamed on taxes and levies, which currently account for about 44 per cent of the retail price of petrol. The nine different taxes and levies charged on petroleum products are almost at par with the product cost when the fuel lands in Mombasa.
Over the September-October pricing cycle, the landed cost for a litre of petrol was Sh60.35, while the total taxes were Sh58.81. In response to questions on what could be done to lower the cost of fuel, Kiptoo suggested that the taxes can be reviewed, citing the outcry from Kenyans and the escalation in international prices.
“There is an opportunity to relook the taxes, bearing in mind the outcry from Kenyans and also the escalation in international prices. This is the purview of Parliament,” he said.
