This archive report was first published on 16 May 2020.
East Africa is poised to reap significant benefits from the current low crude oil prices at the international market. The region's economies are expected to experience a reduction in production costs, which would ease pressure on widening current accounts and arrest a surge in inflation.
According to George Wachira, an oil industry expert, the region has missed an opportunity to stockpile oil due to the lack of strategic reserve facilities. This means that countries in the region cannot take full advantage of the low prices and build up their stockpiles, which would guarantee the benefits last longer even when prices rebound.
Kenya has already recorded the biggest drop in fuel prices in over a decade, with the Energy and Petroleum Regulatory Authority (EPRA) unveiling new maximum wholesale and retail petroleum prices on May 14. The cost of diesel reduced by Ksh19.19 ($.17) per litre to retail at Ksh78.37 ($.72), while the price of super petrol declined by Ksh9.5 ($.08) to retail at Ksh88.33 ($.82).
The changes are based on the average landed cost of imported super petrol, which decreased by 38.94 per cent from $309.03 per cubic metre in March to $188.07 per cubic metre in April. Diesel decreased by 44.04 per cent from $432.70 per cubic metre to $242.13 per cubic metre.
Robert Pavel Oimeke, EPRA director-general, noted that the computation of pump prices has taken into account the changes effected by the Tax Laws (Amendment) Act of 2020. The act made taxes and other levies part of the vatable amount in the calculation of VAT for petroleum products.
Kenya's petroleum import bill in 2019 stood at $2.9 billion, a decline from $3 billion in 2018. In Tanzania, the import bill stood at $1.8 billion, while in Uganda it was $874 million. Savings on import bills would have ripple effects on the current accounts deficits that regional nations are struggling to narrow.
