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Kenyan Motorists Celebrate

20 Jan

There is relief for Kenyan motorists as the country’s Energy Regulatory Commission (ERC) has lowered oil prices. The fuel price drop is the highest since the ERC was set up four years ago. Super petrol is down to 92 Kenyan shillings per litre, Diesel is at 83 Kenyan shillings per litre, while Kerosene is down to 65 Kenyan shillings in Nairobi. The significant drop since last June has been driven by the instability in two chief oil-producing countries, Libya and Iraq. Crude oil prices have plunged in recent times by about 55 per cent on the back of low demand due to weak economic activity and a growing shift from oil to other efficient energy sources. The cost of crude oil now hovers around $45 a barrel so the winners in this epic encounter are importers of crude oil who spend less to buy and stock oil.

Certainly, households, particularly the rural poor, would see more money in their pockets after filling up at the pumps while businesses will benefit from lower input costs. The ERC promised a further drop over at least the next three months, since Kenya imports refined products with a lag time of two months, compared to global crude oil prices. This means the current prices reflect what happened in the world market two months ago.

It is not just motorists who are heaving a sigh of relief following the reduced prices. Kenya’s manufacturing sector stands to register millions in savings on energy prices. The average price of imported diesel, a large component in manufacturing, dropped from $748.73 (Sh68,000) per tonne in November to $641.17 (Sh58,331) per ton in December 2014.

This 14.37 per cent drop is expected to reduce the cost of doing business for manufacturing companies as far as energy costs are concerned with the savings passed on to consumers in terms of reduced shelf prices of goods and services. According to Johnstone Nderi, an advisory manager at ABC Capital, the downward trend in fuel prices should have a net positive effect for investors. As a result of high savings, you are likely to see more resources available for investment which will lead to more productivity and generally a higher standard of living. The downside expected is an increase on the number of vehicles on the roads which can lead to traffic jams and increased emissions into the atmosphere.






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