Cost of living may further rise on higher fuel costs

In Summary

•Price per barrel rose to six-month high of Sh7,512 ($74) after US tightened sanctions

•Effects of the US directive will be felt locally as the Kenyan shilling weakens to the dollar 

Economic prospects intact but public expenditure a concern
Economic prospects intact but public expenditure a concern

Kenyans are staring at the possibility of continued rise in living costs as global fuel prices keep going up due to US sanctions against Iran oil.

Price per barrel rose to six-month high of Sh7,512 ($74) after US tightened sanctions on Iranian oil exports down to zero on April 24 to avoid global price disruptions, a move that has pushed up global fuel prices.

This is expected to have a trickle down effect on food and other basic commodities as manufacturers and importers pass the high bill to consumers.

 

The effects of the US directive will be felt locally as Reuters reported the Kenyan shilling weakening at an average of 101.54  against the dollar as at Wednesday due to dollar demand from the energy sector.

Commercial banks quoted the shilling at 101.50/70 per dollar, compared with 101.40/60 at Tuesday's close.

Crude oil prices rose to Sh7,106 ($70) a barrel in April, from Sh6,903 ($68) in March and Sh6,700 ($66) in February.

The 2019 Economic Survey indicates that average crude oil price increased to Sh7,258.68 ($71.5) in 2018 compared to Sh5,573.45 ($54.9) in 2017.

Currently, super petrol, diesel and kerosene Nairobi retail at Sh106.60, Sh102.13 and Sh102.22 respectively in Nairobi, following latest Energy Regulatory Commission review for the period April 15 to May 14.

The prices represented a sharp increase of Sh5.25, Sh5.52 and Sh2.76 per litre from previous review where super petrol, diesel and kerosene retailed at Sh101.35, Sh96.61 and Sh99.46 respectively.

Kenya National Bureau of Statistics data for month-on-month inflation rose to 4.35 per cent in March from 4.14 per cent in February.

 

The inflation was attributed to food and non-alcoholic drinks index increase by 3.30 per cent. KNBS also pointed to transport index increasing by 0.42 per cent, mainly as a result of an increase in pump prices of petrol and diesel.

US officials reported close to a million barrels per day of Iranian crude oil left, and plenty of supply in the market to ease that transition and maintain stable prices.

Iran is one of the leading oil producers in the world, mostly exporting to large economies including Russia, China, Turkey, India and Japan.

This means these countries will have to source for new import markets, pushing up demand hence increasing prices.