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Saturday, July 31, 2021

Tough times ahead as EPRA set to release new high fuel prices

By The Frontier Post Business

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Fuel prices will from midnight Wednesday increase to highest level in Kenya’s history.

This is because of the rising crude oil costs in what may further stoke public outrage over the high cost of living.

Energy and Petroleum Regulatory Authority (EPRA) has linked the expensive fuel to the recovery in crude oil prices.

The current pump prices are based on the barrel at $61.61, up from $55.27 previously, and $65.41 for the review that kicks off midnight.

There are seven levies and two taxes that EPRA takes into account when setting fuel prices, which have been blamed for the high cost of petroleum products.

A brief from the energy regulator indicates that petrol will increase by Sh4.30 to Sh127.11 per litre in Nairobi while diesel is expected to rise from Sh107.66 to Sh109.96—the highest level since December 2018.

Barring last-minute changes in the monthly review, petrol prices will have increased by Sh20.12 a litre over the past three months, with diesel up Sh13.56 over the same period, one of the biggest jumps over the period in recent history.

The sharp rise in fuel prices has shifted the spotlight on taxation of petroleum products, with Kenyans in border towns reportedly seeking cheaper fuel in the neighbouring countries of Tanzania and Uganda.

The levies account for 48 per cent of current petrol costs.

National Assembly Energy committee chairman David Gikaria said that there is need to look at the taxes and propose changes to the Finance Bill for the new budget.

“The onus is on Parliament now to sit and look at the levies and taxes critically,” said Gikaria.

The Finance Bill is the legal instrument that the Treasury and Parliament use to introduce new taxes and scrap or lower existing taxes.

The changes have a significant weight on the pricing of consumer products and services.

The Treasury is required by law to table the Finance Bill in Parliament before April 30 and have it approved by the President by June 30.

The costs of energy and transport have a significant weighting in the basket of goods and services that is used to measure inflation in the country.

Crude prices have soared to pre-virus levels in recent weeks, driven higher by the production cuts by the Opec nations and the mass rollout of Covid-19 vaccines in many high-income countries.

While demand for oil is still lower than normal, there are hopes of a speedier than expected economic recovery as vaccines are rolled out.

Crude oil prices plunged after a fallout between Saudi Arabia and Russia over production cuts in the wake of the Covid-19 pandemic, which has also reduced demand for energy on slow economic activities.

Crude prices plunged $17.64 April last year, ushering an era of cheap petrol in the months to last August.

In June last year, a litre of diesel was retailing at Sh74.57 in Nairobi and petrol at Sh89.10.

Producers of services such as electricity and manufactured goods are also expected to factor in the higher cost of petroleum.

The energy regulator raised foreign exchange and fuel adjustment surcharges it levies on March electricity bills, hitting household budgets.

In Kenya, for instance, the majority of the population relies on kerosene and gas for lighting and cooking, making crude price a key determinant of the rate of inflation.

Kerosene prices rose to Sh97.85 in the capital city, up from Sh92.44 in February, reflecting a Sh5.41 rise. It is expected to increase by Sh3.60.

The economy also uses diesel for transportation, power generation and running of agricultural machinery such as tractors, with a direct impact on the cost of farm produce.

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