Low global petroleum prices helped Kenya save nearly Sh50 billion in petroleum import bills during the first half of the year despite the steep rise in consumption, the latest industry data indicates.
Kenya imported Sh92.7 billion worth of fuel and lubricants in the year to June, down from Sh140 billion in the same period last year – cutting its oil import bill by Sh47.3 billion, according to the Energy Regulatory Commission (ERC).
At Sh47.3 billion, Kenya’s savings were more than enough to construct another Thika superhighway, which cost Sh32 billion and leave some change. The ERC said the reduction in the import bill was largely due to the plummeting of global oil prices that began in the second half of last year and has persisted to date.
Kenya now imports all its refined petroleum products after it closed the Kenya Petroleum Refineries Limited in September 2013.
Motorists paid an average of Sh85 at the pump for a litre of petrol in Nairobi in the year to June, down from Sh91 in a similar period last year, saving them an average of Sh6 per litre. Diesel pump prices stood at an average of Sh70 a litre in the capital city, down from Sh79 – helping motorists to free up Sh9 for every litre consumed.
The Kenyan government has, however, been keen to collect more revenues and has used the low global prices to introduce multiple taxes on fuel even as consumption continues to grow.
This year, for instance, the National Treasury increased the Road Maintenance Levy by Sh6 per litre of diesel and petrol, a move that is expected to add billions of shillings to the taxman’s pocket.
Petrol consumption jumped 31.5 per cent in the first half of the year to 787.9 million litres as motorists took advantage of the lower pump prices to keep cars on the road.
Consumption of diesel, used to power trucks, buses, vans and factories was up 27 per cent to 1.24 billion litres from 972.6 million litres, according to industry data.
Lower crude prices have ensured that the rising domestic appetite for petroleum products has not translated to a higher import bill.
Road expansion has, however, failed to keep pace with the volume of cars being added to the roads, piling pressure on the existing infrastructure and making log-jams a daily scene in the country’s major towns and highways.
Petroleum pricing plays a central role in the economy because its movement is often transmitted to nearly all sectors of the economy, including transport, manufacturing and agriculture.
Producers, who rely on diesel, often respond to the cost movements by adjusting retail prices of their products and services, pushing inflation up or down.
Quarter of import bill
Inflation stood at 6.26 per cent last month, partly helped by the low petroleum prices and stable prices of agricultural produce.
Petroleum has in the past accounted for about a quarter of Kenya’s annual import bill, but that has now shrunk to 13.4 per cent in the year to June.
The lower prices have helped stabilise the shilling, which has traded at Sh101 since the beginning of the year against the US dollar – the currency used in most of Kenya’s transactions in the global market.
Credit: Business Daily