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Despite a worldwide decline in refined fuel prices, Kenyan consumers continue to grapple with high petrol costs. The Energy and Petroleum Regulatory Authority (EPRA) on Wednesday announced the fourth consecutive monthly drop in diesel prices, albeit by a marginal Sh1 per litre.
This slight reduction falls short of expectations, as the weakening shilling hinders Kenyans from reaping the full benefits of falling global prices.
The EPRA set new prices at Sh195.47 per litre for diesel and Sh206.36 per litre for super petrol in Nairobi, down from Sh196.47 and Sh207.36 respectively.
, Murban crude prices saw a significant drop to $83.32 (Sh13,699.47) last month compared to $91 (Sh14,451) in December.
However, the depreciating shilling continues to impede substantial price drops. The exchange rate used by EPRA was 164.42 units to the dollar, up from the previous rate of 158.81 units. This weaker shilling results in more expensive imports, including petroleum products, which directly impacts pump prices.
EPRA Director-General Daniel Kiptoo stated that the maximum allowed petroleum pump prices for super petrol, diesel, and kerosene decreased by Sh1 per litre respectively during the period under review. These prices are influenced by the fact that local firms importing fuel pay Gulf oil companies in dollars, highlighting the effect of currency depreciation on pump prices.
This marks the third consecutive month of super petrol price drops, although the cost remains above the Sh200-a-litre mark. The price of kerosene also fell by Sh1 to Sh194.23 per litre in Nairobi.
Given that the Kenyan economy heavily relies on diesel, these price fluctuations have far-reaching implications. Producers, farmers, transporters, and other service providers factor in the cost of diesel when setting their goods and services prices.
Although the new pump prices will remain in effect until March 14, they represent the smallest price drop so far. In the previous monthly review, prices had fallen by up to Sh5 per litre.
Interestingly, the energy regulator reduced the cross-subsidisation of diesel to Sh0.96 per litre, preventing further price decreases. Since last year, EPRA has been using super petrol consumers to subsidise diesel users.
However, this trend of price drops may soon come to an end. Oil-producing countries project a rise in fuel demand, which could halt the declining prices Kenyans have enjoyed since November. The Organization of the Petroleum Exporting Countries (OPEC) predicts that global oil demand will increase by 2.25 million barrels per day in 2024, potentially sparking a rally in international and local market prices in the coming months.
