Relief as fuel prices drop for first time in 5 months

Petrol prices have dropped for the first time in five months, defying a weak shilling and the new inflation tax that kicked in last month. The new prices offer a reprieve to motorists but will hit families that use kerosene, whose price has gone up.

The Energy and Petroleum Regulatory Authority (EPRA) Wednesday cut the price of a litre of super petrol by Sh2.86 and that of diesel by Sh3.28, citing a fall in the landed cost of the two commodities.

This reduces the maximum price of a litre of petrol in Nairobi to Sh112.53, the lowest since mid-May, while that of diesel will be at a five-month low of Sh100.60.

The drop in prices of fuel translates into cost savings for motorists running personal cars, commercial vehicles as well as industrial users.

EPRA director-general Pavel Oimeke, however, announced a Sh1.98 increase in kerosene prices, halting the fall that had been recorded in the previous two reviews.

“The changes in this month’s prices have been as a consequence of the average landed cost of imported super petrol decreasing by 5.64 percent from $528.26 per cubic meter in June 2019 to $498.46 in July 2019, diesel decreasing by 7.11 percent from $519.39 per cubic meter to $482.47 per cubic meter and kerosene increasing by 1.88 percent from $503.63 per cubic meter to $513.10 per cubic meter,” he said.

A drop in the petrol and diesel prices came despite the rising price of crude oil and a weakening shilling, both of which have a direct relationship with the price of fuel.

The monthly EPRA review is dependent on the average landed cost of imported oil, Free On Board (FOB) price of Murban crude oil lifted as well as the mean monthly dollar to shilling exchange rate.

The FOB price of Murban crude lifted in July was posted at $66.15 per barrel, an increase of 2.08 per cent from $64.80 per barrel in June 2019.

Over the same period, the Kenyan shilling depreciated by 1.39 percent against the dollar, exchanging at Sh103.31 per dollar compared with Sh101.89 the previous month.

The shilling has come under pressure in the recent weeks, touching 104 units to the dollar.

The pump prices are inclusive of the eight percent value added tax that was introduced in last year’s Finance Act.

The 5.17 percent annual inflation tax adjustment on excise duty that set in on 9th last month was also factored in.

Fuel remains one of the most heavily taxed commodities, with seven levies and two taxes for petrol and diesel.

A costing breakdown by EPRA shows that the average landed cost for a litre of super petrol was Sh51.64, diesel was Sh50.18 while that of kerosene was 53.17.

However, taxes and levies on each litre of the three commodities were at Sh46.54, Sh36.31 and Sh36.66 respectively, showing the extent of burden borne by consumers.

Another factor at play is the distance of a particular delivery station from the port of Mombasa. Areas far from the port incur higher transport costs.

Mandera, which is among the far flung areas, will for instance pay Sh125.39, Sh113.45 and Sh116.81 for a litre of petrol, diesel and kerosene respectively.