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Economy set for a chill as fuel prices jump by Ksh9

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The Energy Regulatory Commission (ERC) has today announced a steep rise in retail prices for fuel, thanks to the new road levy that has come into effect. The new prices, which take effect from 15th July 2016 to August 24th for super petrol, diesel and kerosene, mark the highest single increase in the past few years since price regulation was introduced in the oil retail sector.

Kenyans have enjoyed relatively lower prices for the last two years, with international crude falling due to oversupply in the international market. The weakening of the shilling in 2014/15 caused a rise but not as wide as the current increase.

According to the new price schedule, the cost of fuel has jumped by an average of Ksh6.5, setting the stage for price increases for various goods and services. This is likely going to have a major impact on the economy as oil affects virtually all sectors through either transport or processing. The quickest impact will also be seen in a rise in electricity charges as producers factor in the increase.

In this month’s review, ERC says it has factored in Ksh6 per litre in additional Road Maintenance Levy announced in the budget for both super petrol and diesel in line with the Road Maintenance Levy Fund (Imposition of Levy) (Amendment) Order, 2016.

“Furthermore, the average landed cost of imported Super Petrol increased by 3.03% from US$ 490.18 per ton in May 2016 to US$ 505.02 per ton in June 2016. Diesel increased by 11.15% from US$ 409.02 per ton to US$ 454.63 per ton and Kerosene increased by 2.53% from US$ 468.28 per ton to US$ 480.12 per ton,” ERC says in a press statement.

Taking into account the weighted average cost of imported refined petroleum products, the maximum allowed petroleum pump prices in Nairobi are as follows: Super Petrol increases by Ksh6.76 to Ksh92.93 per litre, Diesel increases by Ksh9.53 to Ksh83.24 per litre, while Kerosene increases by Ksh3.41 to Ksh61.45 per litre.

The purpose of the fuel pricing regulations is to cap the pump prices of the products already shipped in to ensure that importation and other prudently incurred costs are recovered, while ensuring reasonable prices to consumers, the ERC said.


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