Petrol prices in Kenya have been steadily rising for the past few years. The long-term and short-term implications of this need to be briefly discussed. Increased oil prices will lead to increased production costs for companies and individuals. Most of them rely on motor vehicles as their mode of transport. Many industries such as farming incur losses as they can no longer afford to transport their produce from rural areas to town centers.
The increased fuel prices may also lead to an increased cost of living for individuals. Such a drift will adversely affect individuals earning low incomes and those already below the poverty line.
Oil prices play a significant role in regulating a country’s economy. In the last half of 2021, there has been a sharp rise in global oil prices. Kenya depends on crude oil imports, which affects the economy significantly.
The outbreak of the 2020 global COVID-19 pandemic also harmed the global oil prices. The price recovered suddenly as the world became resilient to COVID-19. However, the unpredictability of the pandemic depressed the oil price as the demand was difficult to control. The OPEC (Organization of Petroleum Exporting Countries) and related bodies controlling the exploration and exportation of the oil find it challenging to predict and balance the demand for oil commodities in the global market to avoid a repeat price collapse.
Oil Prices for 2022
Analysts claim that the age-old demand, supply price logarithm can influence the oil prices. High demand can strengthen the price. However, an increased supply weakens the price.
So what is the expectation in the oil prices this 2022? First, the global oil trajectory will determine the quantity of oil produced. Provided there is a growth in the world economy, the demands for the oil products such as gasoline, kerosene, diesel, and jet fuel will continue to rise.
We can attribute the change in demand and reduction in the oil prices to the increase in the utilization of other alternative energy sources and technologies. For instance, adopting the electrified transport system for road, air, rail, and marine can significantly lower the demand for global oil. However, before adopting these technologies, world oil production will continue exceeding the global economy demands.
Renewable energy will continue finding its way in the transport sector. However, as the world economy grows in 2022, the demand and price for oil products will continue growing. In addition, the COVID-19 economic experts argue the global community is prepared for the possibility of pandemic upsurges. Therefore, they have more resilience to handle any financial crisis and ensure the global economy increases. Such moves can trigger a balance in oil prices.
The high cost of oil in Kenya was partly attributed to the value-added tax on oil production. The government move was to increase collection of tax after COVID-19 tax holiday. Other contributors to a sharp increase include the barrel price in the international market, the foreign exchange rate, and the cost of transportation.
Kenyans are currently paying Ksh. 103.54 for 1 liter of kerosene, Ksh. 129.72 for each liter of super petrol, and Ksh. 110.60 for diesel.
Current Trends in Kenyan Oil Prices
Kenyans are bracing for the new oil shortage crisis within Nairobi and the western region. Motorists are rushing for the commodity amid the observed panic buying. Kenya pipeline attributes the challenge to the unpredictable demand of the commodity during the December holiday season and the power hitches at the Mombasa main pipeline.
Motorists have rushed to panic buying as they forecast shortage and rise in oil prices. Currently, there is an irregular supply of MSP (Motor Spirit premium) within the western and Nairobi regions. HOWEVER, the KPC agency has not disclosed how long the current stock will last, which increases the uncertainty in people and panic buying.
Total Energies have hinted that their super petrol supply can only last for not more than a week. It implies that they direly need to restock their oil stores.
Kenyan Fuel Consumption
According to the Kenya National Bureau of Statistics (KNBS), Kenya consumes super petrol to the capacity of about 165.45 million on a monthly basis. Diesel consumption stands at 220.57 million liters monthly. Diesel is, therefore the core element when it comes to boosting the economy for industries and the transport sector. The significant worry of many Kenyans in the transport sector is the fear of collaborated sabotage that has ever happened in the past to have artificial fuel shortages. Such a move will always lead to a hike in prices for super petrol, kerosene, diesel, jet oil and the other fuel types.
On the other side, oil marketers link the threatening shortage to the spontaneous discharge in the past week of the vessel transporting super petrol for one local firm here in Kenya. The other vessels have been unable to discharge their cargo.
In December 2021, Kenya allowed 30,000 metric tonnes in importation as private cargo. The decision led to the delayed cargo offloading for some of the lined-up ships.
The companies have called upon the government through the Ministry of Petroleum to have a share of the cargo to alleviate the possible supply disaster in the sector.
Many questions revolve around the current oil prices in Kenya. Kenyans are concerned and worried about the uncertainty of both costs and the supply of oil products. Energy and Petroleum Regulatory Authority (EPRA) is yet to release the monthly pricing that will run from January 15 to February 15. Let’s wait and hope that EPRA will announce a subsidy in fuel prices to avert the high living costs amid the global fuel prices.